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

Spain| Mar 14 2023
Spain’s Inflation Shows Renewed Pressure
Spain’s harmonized inflation on the euro area measure rose 1.1% in February, accelerating from a 1% gain in January after logging ‘no change’ in December. The inflation picture in February and over three months largely shows inflation pressures are lingering and remain relatively intense. However, the broad sequential path of inflation has been interrupted and does not show clear acceleration although there still is clearly pressure.

The HICP is still hot Spain's inflation over 12 months shows a gain in the HICP of 6%; over six months the rate of increase is only at 2.5% pace; however, over three months the annual rate is up to 8.3%, a sharp gain. Inflation has not only accelerated over three months, but the pace of the advance exceeds the 12-month pace of a year ago when the 12-month inflation rate was 7.7%. The three-month pace is still above that as well as the current 12-month pace.

Spain’s ex-energy gauge is accelerating Spain’s domestic measure of inflation rose by 1.1% in February, up from 0.7% in January and 0.1% in December. The Spanish domestic CPI excluding energy rose 0.7% in February, less than the 1.2% gain in January but the same as the 0.7% increase in December. The sequential path of inflation in Spain shows the headline running at 6.1% over 12 months, then slowing to a 2.5% pace over six months, before speeding up to a 7.9% annual rate over three months. The ex-energy inflation rate is up by 7.6% over 12 months, ticking higher to 7.7% over six months, then accelerating further to a 10.8% annual rate over three months.

Inflation’s breadth confirms its presence The table also offers a view on inflation diffusion over three months, six months, and 12 months. These metrics show that over 12 months inflation accelerates in 72.7% of the categories. Over six months that falls back to 45.5%, slightly less than half of the categories show a step up. However, over three months inflation is back to accelerating in 72.7% of the categories again. Spain continues to have an issue with inflation accelerating. The acceleration is present not only in the headline measure which shows a clear step up and reflation over three months compared to six months. The ex-energy measure shows the steadier acceleration from 12-months, to six-months, to three-months with a significant jump in three-months compared to six-months as inflation remains broadly felt.
by:Robert Brusca
|in:Economy in Brief
Japan| Mar 13 2023
Japan's MOF Business Outlook Survey
Japan’s Ministry of Finance (MOF) business outlook survey for Q1 2023 showed a relatively sharp drop to -3 for all enterprises from +0.7 in the fourth quarter. The bellwether manufacturing index fell to -10.5 in Q1 2023 from -3.6 in the fourth quarter, while the nonmanufacturing index dropped to 0.6 from 2.7 in the fourth quarter.

For medium-sized companies, the manufacturing index plunged to a reading of -17.2 in Q1 2023 from -3.9 in the fourth quarter. For small enterprises, the manufacturing index plummeted to -23.9 in the first quarter from -4.2 in the fourth quarter.

The assessments of activity for enterprises of all sizes were cut back and cut back relatively sharply. The biggest declines were among the medium and small-sized enterprises in manufacturing.

The changes for the quarter-ahead also revealed losses that were relatively sharp although they were better balanced across enterprises of different sizes. For one quarter-ahead, large enterprise manufacturers cut their outlook by 13 points, medium sized enterprises cut their outlook by 13.3 points while small enterprises in manufacturing cut their outlook by 10.4 points. Nonmanufacturing enterprises cut their outlook for the quarter-ahead by 2.7 points for large enterprises, by 4-points for medium-sized enterprises, and by 1.4 points for small enterprises.

Looking ahead by two quarters, we continue to see reductions in the outlook compared to the outlook that was made one quarter ago. And here the outlooks are once again progressive with the smaller firms cutting their outlooks more. Manufacturing large enterprises cut their outlook two quarters ahead by 4.8 points compared to a reduction of -7.9 points from medium-sized enterprises and a cut of -9.4 points for small enterprises. For nonmanufacturers, large enterprises cut their outlook by -0.3 points, a medium-sized enterprises cut theirs by -3.4 points and small enterprises cut theirs by -5.4 points.

Absolute assessments I also construct ranking statistics in the table to compare the standings of establishments of different sizes, and also to facilitate comparison between current, quarter-ahead and two quarter-ahead assessments. Among all enterprises in the current quarter the assessment stands at its 27th percentile, below the 29.7 percentile standing for the quarter-ahead and the 33.8 percentile standing for two quarters ahead. Large enterprises in manufacturing have only a 13.5 percentile standing, the quarter ahead standing is worse at the 11th percentile while the two-quarter ahead assessment has a 27th percentile standing. Nonmanufacturers that are large enterprises have a 41.9 percentile standing compared to a 29.7 percentile standing for the quarter-ahead and a 47.3 percentile standing for two quarters ahead. The rule we find here is that the two quarter-ahead standing is generally better than the current quarter standing for large and medium enterprises; however, for small enterprises the two-quarter ahead standing is lower than the current quarter standing; that could be because the current quarter standing for smaller enterprises is a relatively stronger standing than the current quarter metrics for large enterprises.
by:Robert Brusca
|in:Economy in Brief
Germany| Mar 10 2023
German HICP Continues to Post Large Gains
German inflation continued to run hot in February. The HICP gain in the month of 0.6% was stronger than January's 0.4% while the core rate accelerated to 0.7% from January's 0.3%.

Overview- Germany logs a year-on-year HICP gain of 9.2% in February which is stronger than January's 9.1% but lower than its string of increases from September to December of last year; a string in which the German headline year-on-year inflation rate peaked out at 11.5%. The core year-over-year rate of 7.4% in February is a sharper rise than its 7.0% year-on-year increase in January. That marks a new cycle high for the annual core inflation rate! That's certainly not a good development for inflation prospects in Germany.

HICP some deceleration some mixed performance- However, because of a slowdown and, in fact, the decline in the headline month-to-month HICP in December, Germany's headline inflation rate shows deceleration in its broader sequential trends. Its 9.2% gain over 12 months softens to 8.9% over 6 months, and over 3 months the annual rate increase is at just 1.6%. The core rate is a bit less cooperative with a 7.4% gain over 12 months rising to an 8.7% gain over 6 months but edging down to a 5.9% annual rate over 3 months.

CPI excluding energy- Germany's domestic CPI measure shows a similar deceleration in the headline. But for the CPI excluding energy the German domestic CPI shows a year-over-year gain of 7.6%, rising to 8.3% over 6 months and then falling back only to a 7.1% annual rate over 3 months. That 3-month pace for the CPI excluding energy is below the 12-month pace, but the 7.1% compared to 7.6% is still not much progress and still a very high rate of inflation for an ex-energy measure.

Diffusion of inflation monthly- On balance, the German headline and core trends are not very encouraging this month. Looking at the diffusion that measures the tendency for inflation to accelerate, there was a great step down in December where diffusion fell to only 9% which means 91% of the categories were showing inflation decelerated in December compared to November. in January diffusion stepped up to 36% and in February it stepped up again to 45%. But both these gauges show that inflation is accelerating month-to-month and in fewer than half of the categories. These calculations do not use any weighting.

Sequential diffusion- Sequentially the diffusion indexes show that inflation is accelerating over 12 months compared to 12-months ago in about 82% of the categories. Over 6 months inflation is accelerating compared to its 12-month pace in about 64% of the categories. Over 3 months inflation has accelerated in only about 45.5% of the categories. Still 45.5% is not that decisively below the break-even which is at 50%. Diffusion trends are somewhat encouraging but given the height of inflation I would mark them as still inadequate.

Oil prices- Underlying a lot of what's going on with inflation is oil prices and we have Brent prices denominated in euros memorialized at the bottom of the table. Brent prices are down compared to a year ago by 5.9%, they're down over 6 months at a 34% annualized rate, and they're down over 3 months at a 42% pace. Monthly data show Brent prices fell by 13.6% in December, they rose month-to-month by 1.4% in January and then they fell by just 0.3% in February. The help on inflation reduction that's been coming from oil prices appears to be diminishing substantially for Germany. Meanwhile, inflation diffusion while showing some deceleration is not showing very impressive results.
by:Robert Brusca
|in:Economy in Brief
Sweden| Mar 09 2023
Sweden’s GDP Drops at End 2022; Revives Early in 2023
Sweden's GDP, fell at a 2% annual rate in Q4 2022 with private consumption falling at a 1.5% annual rate and public consumption rising by nearly a percentage point at an annual rate. Capital formation has become suddenly very weak, falling at a 3.8% annual rate. Exports are expanding at a 1.8% annual rate; imports are falling at a 3.6% annual rate, undoubtedly reflection of the weak private sector demand and the decline in capital formation. Domestic demand in Sweden falls at a 9.8% annual rate in the fourth quarter adding to a 2.3% annual rate decline in the third quarter. Both of these followed a super-sized 12.5% annual rate gain in Q2 2022.

Sweden’s year-over-year trends show that the robust gains in domestic demand that held through the second quarter of 2022 have come under pressure and given way to a year-over-year decline by the fourth quarter. This is also reflected in a weakening of imports that were running double-digit growth rates until the fourth quarter when the pace slowed to 4.2%. Reflecting conditions abroad, Sweden's exports also have slowed, but not as dramatically as imports. They have backed off from growth rates of 8.5% to 6.5% to a 5.3% annual rate in the fourth quarter. Capital formation growth rates are about half of what they were and in preceding quarters on a year-over-year basis. Public consumption has been slowing. It had been relatively strong through the fourth quarter of 2021 but in 2022 it slowed quite dramatically and it's growing only 0.3% year-over-year in the fourth quarter. At the same time private consumption has slowed sharply from growth rates of 5% to 9% to year-over-year growth of just 0.2% in the third quarter and -2% in the fourth quarter. All of these swings in GDP components translate into a GDP number overall that is faltering. It had seen growth since the third quarter of 2021 fluctuate between growth rates of 4% to 6%; then it suddenly slipped in the third quarter to a 2.5% growth rate and in the fourth quarter to a decline of 0.1%. Clearly Sweden is struggling in terms of GDP growth although the recent monthly tally is looking better.

Sweden's monthly GDP estimate shows a gain of 2% monthly in January reversing what was a 0.7% fall in December. Exports and household consumption added to the positive momentum from government production. The January gain brought the year-over-year gain to 3.6% following what was a 1.5% drop in the previous month on the same basis.

The monthly gaining GDP was boosted by a rise in industrial production; it showed a 4.4% gain in January over its year-ago level, much stronger than the 0.3% rise seen in December. In January manufacturing output rose by 2.2% month-to-month led by investment output which rose 8% followed by intermediate output that rose by 4%. Consumer nondurables output, however, fell very sharply by 13.1% on the month.
by:Robert Brusca
|in:Economy in Brief
Germany| Mar 08 2023
German IP Jumps in January; Sequential Acceleration Is in Progress
Industrial production in Germany rose by 3.5% month-over-month, but it continued to decline year-over-year as it remains lower than its January 2022 level by 1.2%. However, over six months IP is growing at a 2.5% pace and over three months it is advancing at a 5.4% pace. German industrial output is accelerating and climbing out of a year-over-year hole.

Despite the clear, strong, acceleration in overall industrial output and in manufacturing alone, the three sectors consumer goods, capital goods and intermediate goods fail to produce one sector with output that is sequentially accelerating, like the headline.

Month-to-month, while overall industrial output was up sharply, output fell for consumer goods and capital goods; however, intermediate goods output grew by a sharp 6.9% month-to-month.

Construction sector output also rose strongly in January after a nearly equally strong drop in November. Sequential growth rates for construction are mixed.

Real sales rose by 0.2% in January and came close to showing sequential acceleration. Certainly demand is showing a strong recovery in progress.

The current ZEW assessment of Germany’s industrial sector has a deep negative value. However, ranking each of the industrial gauges produces rank standing below the 30th percentile for the ZEW current index, the IFO manufacturing gauge and IFO manufacturing expectations. The EU Commission index has a stronger standing at its 71.8 percentile.

Elsewhere the year-on-year growth rates show only the capital goods sector with a standing above its 50% percentile on data back 2000. The construction sector has sub-50-percentile standing as do real sales. Standings below the 50% mark are standings below their respective medians. In contrast, German real manufacturing order growth is strong.

For reference, two other early reporting European countries Portugal (an EMU member) and Norway, experienced very different recent trends and percentile standings.

The financial column shows changes in the various metrics either their index levels for IP gauges or index levels for surveys in January 2023 to performance in January 2020. Output is broadly lower than it was in January 2020, putting the industrial performance of the last three years in perspective.
by:Robert Brusca
|in:Economy in Brief
Germany| Mar 07 2023
German Factory Orders Rise But Still Display Poor Momentum
German factory orders rose by 1% in January following a 3.4% increase in December. Of course, that gain came out the heels of a 4.4% decline in November. As a result, German factory orders are still declining over 12 months, over six months and over three months. The order pattern shows clear deceleration as the 12-month drop is at a -11% pace, the six-month drop is at an -8.9% pace and the 3-month drop is at a pace of less than -1%.

Foreign orders substantially carried the day in January with a 5.5% increase on the heels of a 2% increase in December, but that's after a 6.9% decline in November. Foreign orders show an increasing profile against a -12.3% pace over 12 months, a -8.9% annual rate over 6 months, and a rise at just less than 1% over 3 months.

Domestic order trends are poor German domestic orders on the other hand were weak in January, falling by 5.3% after a 5.3% rise in December; that compares to a 0.5% drop in November. Domestic orders also show an improving profile but not as dramatically improving as for foreign orders; over 12 months domestic orders posts a decline at a -9.2% rate; that pace lets up slightly over 6 months at -8.9%, and that gives way to a -3.3% annual rate over 3 months.

Quarter-to-date In the quarter-to-date with only one month of data in hand, total orders are growing at a 10.6% annual rate led by a 29.1% surge in foreign orders and held back by a -12.6% annual rate drop in domestic orders. This has been a difficult period for German orders. Calculating growth back since COVID struck in January 2020, total orders, foreign orders, and domestic orders all are lower with the declines on the order of 2.5% or so.

Real sales by sector Real sales show more resilience with manufacturing sales off by 0.1% over 12 months, rising at a 4.9% annual rate over 6 months, and holding out a 4.9% annual rate gain over 3 months. Consumer goods categories show declines over 3 months for consumer goods overall, and for consumer durables and consumer nondurable sales. Over 3 months the strength comes from capital goods where there's an increase at a 27.1% annual rate, after a 20.7% annual rate increase over 6 months, a 7.1% annual rate increase over 12 months. Intermediate goods output, however, is still declining and decelerating with the -7.3% rate drop over 12 months, a -10.9% annual rate drop in sales over six months and a -15.7% annual rate drop over three months. For consumer goods, the sequential patterns are mixed.

European industrial performance compared Indicators of industrial confidence for the EU Commission allow us to compare Germany's performance with France, Italy, and Spain. All four countries listed in the table show improvement in January compared to December. France and Spain also show improvement in December relative to November. The queue standings for these metrics, however, are moderate. Germany has the best performance is this EU survey with a 79.3 percentile standing. Italy has a 56-percentile standing, about the same as Spain, while France has a 50.5 percentile standing. Indicators show small improvements since January 2020 for Spain and for Italy against a substantial improvement for Germany; only France shows a net weaker industrial reading of January 2023 compared to January 2020.
by:Robert Brusca
|in:Economy in Brief
Europe| Mar 06 2023
EMU Retail Sales Expand in January But Remain Weak on Trend
Sales in the European Monetary Union rose by 0.3% in January after falling by 1.7% in December and rising by 0.7% in November. Sequential growth rates, however, still show sales withering at an increasingly weak pace.

Sequential sales show a 12-month decline rate of -2.4% that steps up to -2.6% over six months when annualized and again to -2.8% annualized over three months. On a quarter-to-date basis and calibrating the January sales level as a growth rate over the fourth quarter average, real retail sales in the euro area are falling at a 3.7% annual rate.

It has generally been a period of weakness for retail sales in the euro area. The chart shows separate retail and auto sales trends plotting sales levels rather than growth to highlight actual performance. At one point, auto sales had recovered and began to expand more or less on trend. But that expansion ran out of gas late in 2021. The level of real sales continues to move lower in the euro area. Currently EMU total sales volumes are higher than they were in January 2020 before COVID struck by only 2%. Food & beverage sales, that tend to be more stable, saw declines over 12 months, 6 months, and 3 months, but they are declines of diminishing intensity. Food & beverage sales are even increasing on a quarter-to-date basis in January. However, the volume of food & beverage sales is lower by nearly 1% than it was in January 2020, a testament to the current degree of weakness in sales in the euro area.

Country by country trends in key early reporters At this early date, the large European Monetary Union members have not reported separate figures, but the monetary union reports an aggregate based on whatever early estimates it has been able to make and by other early reporting members.

Among the seven countries that report in the table, only the Netherlands and Portugal report sales increases over 12 months, 6 months, and 3 months. The Netherlands reports accelerating sales on that timeline with sales expanding by 0.3% over 12 months, at a 4.5% annual rate over 6 months, and at a very strong 17.1% annual rate over 3 months. Denmark reports sales accelerating as they dig out of a hole from a decline rate of -5.5% over 12 months, at a -2.6% annual rate over 6 months and finally rising at a 1.5% annual rate over 3 months. Similarly, Sweden shows sequential improvement but doesn't get sales into positive territory with growth at -7.1% over 12 months, at a -3.8% annual rate over 6 months, and then at a -0.4% annual rate over 3 months. Interestingly, none of the reporters in the table show sales on a continuing decelerating path; however, there's still substantial weakness being reported from Belgium, Sweden, Norway, and the U.K.

Quarter-to-date sales show sales increases in Netherlands, Denmark, and Portugal. Their quarter-to-date declines in sales reported from Belgium, Norway, the U.K., and Sweden.

Sales volumes gauged in total from the January 2020 date before COVID struck show sales up by 3.5% in the Netherlands, by 2.9% in Portugal, by 1.4% in Norway, and barely higher gaining 0.2% in Denmark. However, in Belgium, the U.K. and Sweden, sales are lower in January 2023 than they were in January 2020.

The performance of motor vehicle registrations (sales) is a bit of a counterpoint, but it doesn't change the general picture or tone of weakness in consumer spending. Motor vehicle sales fell by 4.4% in January after falling 0.6% in December. The pace for motor vehicle sales for 15 economies in the European Union shows a 12.6% gain over 12 months, a stronger 29.7% gain over 6 months, and then a much weaker 6.1% gain over 3 months. These contrast with overall retail sales that show declines and even declines that are decelerating over that timeline. While auto sales are showing sporadic growth they are certainly not accelerating. And according to date basis, motor vehicle sales are much weaker than retail sales falling at a 15.3% annual rate QTD and vehicle sales are lower by 19.1% compared to what they were in January 2020.
by:Robert Brusca
|in:Economy in Brief
Europe| Mar 02 2023
EMU Unemployment Rate Is Flat in January But Seems Less Bulletproof
Low and stable unemployment The unemployment rate in the European Monetary Union (EMU) in January stands at 6.7%, the same place it stood in December and has stood for three months in a row and in nine of the last 10 months. That is excellent stability. If we rank the level of the unemployment rate since the mid-1990s, the level of the unemployment rate has been lower in the EMU only about 3.2% of the time. That marks this rate as exceptionally low.

Are trends deteriorating? However, there's evidence that some of the strength, as well as the trend improvement, in the labor market are losing momentum in January. Of the 12 monetary union countries that report in the table, only two show lower rates of unemployment in January compared to December. In December, three countries showed lower rates of unemployment month-to-month. In November, there were four countries that logged lower rates of unemployment than the month before. The tendency for unemployment rates to fall is diminishing.

In January, there were six countries for which the rate of unemployment increased month-to-month. This compares to three countries that had that characteristic in December, and five in November. So far, the increases in unemployment rates month-to-month have been small or have occurred in countries with small labor markets. They have not changed the trend or overall level of the rate turning by upward for the EMU-wide unemployment rate.

Broader, sequential trends Looking at the broader data over three months compared to six months, four countries show declining rates of unemployment compared to six showing increasing rates of unemployment. Comparing the six-month change in unemployment to the change over 12 months, five countries show lower rates of unemployment over 6 months compared to 12 months and six countries show higher unemployment rates over 6 months compared to 12 months. Comparing the changes over 12 months to the changes that occurred over 12 months a year ago, we find that unemployment rates are lower in six countries on this basis and higher in six countries on this basis – a standoff. The overall rate for the European monetary system shows a decline of 0.2 percentage points over 12 months, an unchanged performance over 6 months and an increase in the unemployment rate by one tenth of one percentage point over 3 months.

Unemployment progress has a long track record of success The overall unemployment rate, as noted above, is still extremely low; the EMU-wide unemployment rate compared to January 2020 before COVID struck is now a half a percentage point lower. Only four of twelve countries have higher unemployment rates today compared to January 2020. Looking back from the mid-1990s, only two countries in the table have unemployment rates that are above their historic medians on that timeline; and those are Austria and Luxembourg. Meanwhile, four countries have unemployment rates that rank lower less than 10% of the time that mark them as countries with extremely low rates of unemployment (Germany, France, Ireland, and the Netherlands).
by:Robert Brusca
|in:Economy in Brief
Global| Mar 01 2023
S&P Global MFG PMIs Contract on Balance But It’s More of a Mixed Bag
S&P manufacturing PMIs for February show a much more mixed bag than in previous months. Of the 18 reporting entities in February, 11 improve month to month. So, on a country count, there are more improvements than deteriorations. However, looking at the median level month-to-month, it is still lingering below ‘50’ indicating contraction in the lexicon of diffusion indexes - even though the median value does improve slightly month-to-month. As I noted, a mixed bag.

Sequential data also show complicated trends. The average PMI for manufacturing over three months is slightly better than over six months but only by a tick comparing 48.5 to 48.4. That's still showing a sector decline in terms of PMI diffusion index values. Over six months only 5 reporters show improvement compared to 12-month values. There is net deterioration over 12 months where there are only 5 reporters out of 18 that improve compared to 12-months ago.

Despite the slight firming on the month, there is continued contraction in manufacturing being reported although the contraction being reported is quite small. Still, the median queue standing that evaluates the current month has a standing compared to where it's been since 2019 at its 37th percentile. On that timeline back to January 2019, only six of 18 entries show percentile standings above their historic medians. On that span, the median is marked by a 50-percentile standing. Oddly - and interestingly- China and Russia both claim 98 percentile standings on the period, the highest in the group. Part of that is a reflection of how weak they have been.

The changes since COVID arrived, back to January 2020 levels, show there are eight reporting regions that have current manufacturing PMI values above their January 2020 levels: that’s over a span of three years. There's been very little growth overall as the median change has been a decline of 0.2 in the median PMI index.

Asian reporters in the table have fared better than the whole group overall. They log an average PMI value of 50 in February and sequential averages from 12-months, to six-months, to three-months show a progression higher. Their percentile standing at the 48th percentile is higher than the median for the group. China’s improvement and exit from a zero Covid strategy is helping.
by:Robert Brusca
|in:Economy in Brief
Japan| Feb 28 2023
Japan’s Industrial Struggles Intensify
Japan's industrial sector sputters and declines looking like a car that is running out of gas in January. January output fell by 4.3%, that is a sharp drop, after being flat in December and rising 0.7% in November. Progressive growth rates show that output growth is declining and decelerating. Japanese output is down by 3.2% over 12 months, falling at a 10.6% annual rate over six months, and then falling at a 13.5% annual rate over three months.

Manufacturing- This weak result is driven by manufacturing which saw output fall by 4.6% in January and where the sequential growth rates for overall manufacturing mirrors the path for industrial production and is getting progressively weaker as well.

Sector performance- Sector growth rates in Japan for consumer goods, intermediate goods, and investment goods show output on the decline and clearly decelerating across all of these categories. In January, output falls in all three sectors as it dropped 3% for consumer goods, 5.2% for immediate goods, and 4% for investment goods. Consumer goods output is holding up better than output in other sectors; still, the increase in output is just 3% over 12 months, it's up at a 1.1% annual rate over six months and it's dead flat over three months. Intermediate goods output falls 7.5% over 12 months, drops at a 14% annual rate over six months and declines at a 21.5% annual rate over three months. Investment goods output falls 1.1% over 12 months, then falls at a 20.3% annual rate over six months, and at a stunning plunge at 35.7% annual rate over three months. Manufacturing in Japan is unequivocally weak and output is unequivocally declining and it's declining in all sectors and it's declining on all tenors.

Two industries- Two industries saw increases in output in January. Mining output increased 1.3% and electric & gas output increased by 0.2%. Mining still shows sequential weakness with output down 6.2% over 12 months, followed by a 6.4% annual rate decline over six months, then accelerating to a 12.5% annualized rate decline over three months. Electric & gas output falls 4.2% over 12 months, accelerates to a 9.6% annualized rate decline over six months, but then logs an 8.1% annualized increase over three months, largely on the back of a one-month rise in December.

QTD Output is falling on a quarter-to-date (QTD) basis early in the first quarter. These calculations take output in January and gauge its annualized growth rate centering the calculation’s base on the average for the fourth quarter while compounding the growth rate. Early in the first quarter, output is falling at a 22% annual rate with manufacturing output falling at a 23% annual rate. Consumer goods output is falling at about a 10% annual rate, with intermediate and investment goods output each falling at a rate of 30% or faster. The decline in output in the first quarter is deep and broad.
by:Robert Brusca
|in:Economy in Brief
Europe| Feb 27 2023
EU Commission Index Shows Little Change in EMU in February
In February, the EU index for overall activity in the European Monetary Union ticked slightly lower to 99.7 from 99.8 in January. While there is little-change month-to-month, it shows that the improvement is holding up since December had a value of 97.1 and November, a value of 95.1. EMU economic assessments are moving higher, but in January and February gains are consolidating.

Sector stories The industrial confidence measure registered plus-one in both February and January, compared to readings of minus-one in both December and November. Consumer confidence improved in February moving to -19 from -20.7 in January, reflecting improvements from both December and November levels. The retailing assessment at zero in February, improves from -1 in January, -3 in December, and -6 in November - a clear ongoing trend of improvement for retailing. The construction sector is more waffling. Its February reading of +2 is above the January reading of +1, but that's below the readings for both December and November. Construction has remained relatively stronger than the other sectors; however, it is not advancing now. The services sector at +10 in February is at the same level as it was in January, but it's up from an assessment of +8 in December and of +4 in November.

Sector summary On balance, the sector readings in the European Monetary Union are stable or higher; construction is a minor exception. However, these are not high readings. The overall European Monetary Union index has a standing in its 47.9 percentile (below 50 and therefore) below its historic median level. Consumer confidence sits at an extremely weak 9.1 percentile reading, in the lower 10 percentile of its historic queue of values. The industrial sector has a 73-percentile standing; it's in the top 30% of historic readings; services have a 62-percentile reading, just inside the top 40% of readings but the sector is above its median and that's still a positive situation. Retailing and construction have the two strongest readings: retailing has a reading in its 82.9 percentile with construction in its 87.7 percentile; both are quite strong readings in historic comparison.

Since COVID... If we look at changes since the Covid situation developed, the overall index is lower by five points compared to January 2020 and all the sectors are lower compared to January 2020 except the industrial sector which is higher by six points. On balance, there has been little growth and for the most part weaker conditions over the last three years since COVID came to town.

Country-level conditions There are 18 early reporting European Monetary Union members reporting and among these 18 members all but 7 showed month-to-month improvement in February; all but two had shown improvement in January. These metrics of breadth reinforce the notion that conditions in the monetary union have been improving even if they're not strongly reflected in the aggregate data. Clearly, conditions are better in January and February, taken together, than they were in November and December, although there's scant improvement in February compared to January. That finding is echoed across the various industries as well as across countries. Country level data are, for the most part, still very weak among these 18 reporting countries. Only four have percentile standings above their medians - above a level of 50%. Among the big-four economies Germany has a rank standing as 37th percentile, France is at its 40th percentile, Spain is at its 41.6 percentile; only Italy, in its 62nd percentile, has a reading above its historic median. Among the weakest standings are Estonia at a 5.7 percentile standing, Slovakia at an 8.2 percentile standing, Belgium at a 14.9 percentile standing, and Finland at a 15.6 percentile standing.
by:Robert Brusca
|in:Economy in Brief
Germany| Feb 24 2023
Consumer Climate Experiences Global Warming in Germany; Can It Continue?
The GfK consumer climate index for Germany that projects climate from March has improved to a reading of -30.5 from -33.8 in February. This marks the 5th month in a row that climate in Germany has improved. So far, the steps are small, but they are persistent. Economic expectations, a survey that lags by a month, have four improving months in a row; income expectations, also on a one-month lag, have five improving months in a row. The propensity to buy, another lagging component, however, is only just improved in February from January whereas in January had deteriorated compared to December. Propensity to buy readings are hovering closer to their cycle lows although the cycle lows are nowhere near global lows for this series, as they are for climate and income expectations.

The context for this month: History- Despite the rather widespread and now nearly half-year trail of improvement, the path of improvement is a shallow one and the current readings for climate and most components remain stuck at historically low levels. Climate has been lower than its March reading only 2.7% of the time on data back to January 2002. Economic expectations fare the best of the lot, with a 48.4 percentile standing as of February, marking it is quite close to its historic median level (which would be marked by a 50-percentile standing). Income expectations have a very weak, 3.5 percentile standing; they are weaker only 3 ½% of the time. Consumers’ ‘propensity to buy’ is weaker than its February reading only 20% of the time. Climate alone has a March reading; the components have readings that are up to date as of February.

Elsewhere in Europe- In addition to the improvement in Germany, the U.K. logs an improvement (on data current through February). France posts a February setback but on readings that have been rather stable over the last five months. Italy's most recent reading is in January; it marks a decline to 100.9 from a level of 102.5 in December. But each of those two readings is still the strongest reading on Italian confidence since May 2022.
by:Robert Brusca
|in:Economy in Brief