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

Europe| Jun 21 2023
European Car Registrations Rise Briskly in May
Car registrations in Europe rose briskly in May, advancing by 10.5% from April as registrations (hereafter, sales) had fallen 12.9% month-to-month. Sales changes, calculated from three-month moving averages, increase month-to-month by 1.3% after a 1.7% April drop. Rather than viewing May as a strong man, it appears to be a rebound month.

Sequential growth rates show 12-month growth in European sales at 20.5%, a very strong pace. Over 6 months, registrations/sales were down by 1.2% at an annual rate. Over 3 months, they expanded at a 16.1% annual rate. Growth rates, calculated from three-month moving averages, show an increase over 12 months of 23.7%, a 6-month increase at a 2.4% pace and a 3-month increase at a 3.3% annual rate. Smoothing the sales shows steadier and continued growth in car registrations/sales in Europe. While the year-over-year gain is quite strong at 23.7%, the ensuing 3-month and 6-month growth rates are much more moderate in the 2½% to 3 ½% range, annualized.

Growth rates by country largely echo the headline as Germany, Italy, Spain, and the U.K. all show positive growth rates in May that are recovering from declines in April. France shows a 0.6% gain in May following a 1.2% rise in April, scoring 2 gains in a row but on much more moderate changes than those reported in other countries.

Sequential gains by country reveal extremely strong gains in Germany, Italy, and France, where the German three-month growth rate annualizes to 66.9%, France to 32.1%, and Italy to 23.4%. These contrast with Spain where there's a 20.3% decline in registrations and the U.K. that has a 48.5% decline in registrations at an annual rate over 3 months.

Sequential patterns show indeterminate or complex results for Germany, France, and Italy. All three cases demonstrate growth rates over 12 months near or over 20% and slip over 6 months only to rebound over 3 months to growth rates nearly as strong or at a stronger pace than they posted over 12 months. France is again the more unusual case as its growth rates are steady and accelerating with a 6-month fall back in growth that's minor in nature as growth is 18.5% over 6 months compared to 22.6% over 12 months and then advancing at a 32.1% annual rate over 3 months. Spain and the U.K., however, show clear decelerations in growth from 12-months to 6-months to 3-months with both posting double-digit declines over 3 months annualized.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 20 2023
EMU Export and Import Growth Sink as Trade Balance Waffles
Trade flows tell us that Europe is weak- The most striking feature about trade and the European Monetary Union as well as in the U.K. in April is the uniformity of weakness of exports and imports over three months and six months. The table displays data for the European Monetary Union aggregate for exports in manufacturing and nonmanufacturing, and for imports in manufacturing and nonmanufacturing. Total exports and imports are presented for France, Germany and the U.K. For other EMU members, Spain, Finland, Portugal, Belgium, and Italy, export data are presented. For all these countries and for the larger EMU economic unit, only Germany has positive export growth over three months and six months. France has positive export growth over three months and all the remaining entries have negative export growth - declining exports and declining imports (where shown)- on balance over three months and six months. The trade data are pointing to significant weakness in economic growth in Europe as of April. It is unusual for economic data to coalesce in such a striking and uniform picture.

Trade in EMU In the European Monetary Union, exports rise 1.1% over 12 months then fall by 10.4% over 6 months at annual rate and at a 10.5% annual rate over 3 months. Total imports register a similar but weaker profile with imports falling 9.5% over 12 months, at a 22.8% annual rate over 6 months and at a 15.4% annual rate over 3 months.

EMU manufacturing exports rise by 2.4% over 12 months, falling to a -12.5% annual rate over 6 months; they log a -8.5% annual rate over 3 months. Imports, by comparison, are slightly weaker over 12 months, falling by 0.7%, but then outperform exports by falling only a 10.7% annual rate over 6 months and at only a 3.4% annual rate over three months.

Nonmanufacturing trade shows exports lower by 4% over 12 months, flat over 6 months and falling at an 18.8% annual rate over three months. Imports, by comparison, are much weaker owing to the inclusion of energy where prices have been falling much faster. Imports fall at a 24.7% annual rate over 12 months, at a 42.6% annual rate over 6 months and at a 36.4% annual rate over 3 months.

Country data and trends The two largest economies in the EMU show weak trends although exports hold up better than imports. For Germany, exports rise 7.6% over 12 months, at a 1.7% annual rate over 6 months, and at a 0.8% annual rate over 3 months. These are positive growth rates over each horizon. But growth is steadily diminishing – a clear weakening pattern for German exports. For France, exports rise 9.5% over 12 months, then decline at a 6.5% annual rate over 6 months; they then recover to grow at a 0.7% annual rate over 3 months. The three-month growth rate interrupts the pattern of progressive deterioration, but there's a clear tendency to weaker growth across French exports. On the import side, both German and French exports show weakness; but only French imports show ongoing progressive weakness.

U.K. trends- The U.K., which is no longer a monetary union nor EU member, shows sharp declines in exports that nonetheless continue to rise 24.2% over 12 months. U.K. exports fall at a 14.6% annual rate over 6 months and fall at an outsized 54.9% annual rate over three months. U.K. imports fall 1.2% over 12 months and fall at 10.1% annual rate over 6 months, then slow their descent slightly with a 7.1% annual rate drop over 3 months.

Other EMU members- Next, we look at a group of countries of various sizes for Europe; all of these are European Monetary Union members. Finland, Spain, Portugal, Belgium, and Italy show declines in exports over 3 months and 6 months while most of them also show declines over 12 months with only Portugal and Italy being exceptions. Italy logs a 4.3% increase in exports over 12 months while Portugal eeks out a 0.2% increase.
by:Robert Brusca
|in:Economy in Brief
Japan| Jun 15 2023
Japan’s Trade Deficit Shrinks While Exports and Imports Both Contract
Japan's trade report posted sobering trends in May as Japan's deficit shrank from April, continuing a round of improvement as the trade deficit has improved in six of the last seven months.

Japan's trade flows tell a story of weakening global economic growth as well as of weakening growth in Japan. Japan's nominal export growth has declined over 12 months, 6 months, and 3 months. Imports also show declines over 12 months, 6 months, and 3 months. In neither case, is the nominal decline sequentially worsening, although in both cases the 6-month and 3-month pace of decline is at a greater rate than the 12-month decline.

Trade flows are contracting Real exports and real imports both fell in May, with exports falling by 4.6% and imports falling by 7.3%. Looking back at sequential trends of real exports, as for the nominal flows, there are declines over 12 months, over 6 months, and over 3 months. Once again, the declines over 3 months and 6 months are both greater than the pace of the decline over 12 months. This indicates a general deterioration in the pace of trade flow growth, but there is not a clear-cut monotonic decline in the growth rates. For imports, there are also negative growth rates over 12 months, over 6 months, and over 3 months. And - like for the nominal counterparts, and as in the case of exports as well - there's no clear-cut sequential trend deceleration in progress although over 6 months and 3 months the declines in growth rates are at a greater pace than the decline over 12 months.

Growth is slowing... These general trends indicate that global growth is weakening because Japanese export volumes are weakening. Import volume weakness suggests that Japan's domestic economy is weakening as well. Japan's nominal import declines show greater weakness than real declines because import prices are weakening faster, largely because of weakness in oil prices.

The yen is weakening In this environment, the yen has slipped against the dollar falling by 6.4% over 12 months, rebounding slightly to rise on balance over 6 months, then falling by 12.6% over 3 months. The real broad yen index, an index of the yen expressed in real terms and against a broad basket of currencies, mirrors the movement in the nominal yen against the dollar. This real, broad-based, measure is lower by 4.2% over 12 months, has a slight rebound over 6 months, then falls at a 6.9% annual rate over 3 months.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 14 2023
EMU Trends Erode with Considerable Volatility
Industrial output in the European Monetary Union grew by 1% in April with manufacturing shooting up by 3.7%. Hold the applause on this, however. Because this is a rebound from a larger 3.8% drop in March and a larger 5.8% drop in manufacturing output. While output overall and in manufacturing had gained in February, the 3-month change shows a decline in total EMU industrial production had a 5.8% annual rate over three months compared to manufacturing where there is a decline of 4.6% at an annual rate. The outsized increases posted in April do not reverse the trend weakness in industrial production or in manufacturing output in the European Monetary Union.

April: strong with isolated strength April's rebound, in fact, is wholly the result of strength in the capital goods sector where output surged by 14.7% after contracting by 15.2% in March. Consumer goods output fell by 2% in April, intermediate goods output fell by 1%. Both consumer goods and intermediate goods output have fallen for two months in a row. The strength that appears in April industrial production and in manufacturing output is wholly the result of a partial recovery in capital goods output.

Sequential rates of growth flag weakness Sequential rates of growth in overall output and in manufacturing output show progressive deterioration. For manufacturing, there's a 1.3% gain over 12 months, a 2.7% annual rate decline over 6 months, and a 4.6% annual rate decline over 3 months - that's a clear worsening pattern. Consumer goods output comes close to showing a deteriorating trend, but minor differences in the growth rates between 3-months and 6-months prevent that from occurring. Consumer durable goods output shows progressively smaller declines from 12-months to 6-months to 3-months. Nondurable goods output carries the day for progressive weakening trends. Intermediate goods also show diminishing sequential weakness as a 6.1% decline over 12 months becomes a 5.1% annual rate decline over 6 months and diminishes further to a 4.7% annual rate fall over 3 months. Interestingly and ironically, capital goods endorse the progressive deterioration trend with the 9.5% increase over 12 months, a weaker 0.3% annual rate decline over 6 months and a 3.7% annual rate decline over 3 months.

Country patterns Country patterns show broad output declines for manufacturing across 13 EMU countries reporting in April with eight showing declines in manufacturing (all of them, month-to-month declines of 1.8% or more). Country data also show 9 EMU members with output declining in March. March and April show much worse conditions than February when only 3 EMU countries showed month-to-month declines in output. Over 3 months eight European monetary union countries show output declines, seven countries show declines over 6 months, six countries show declines over 12 months. However, if we look at the median results for these countries, the median decline is 3.1% over 12 months that shrinks to a 1% decline at an annual rate over 6 months and then expands back to a 2.3% annual rate decline over 3 months, imposing no clear secular pattern, but showing persistent declines. However, over these three periods, as well as over the three most recent months, fewer than 50% of the reporting countries show output is accelerating when we evaluate it period-to-period. For example, output over 12 months is accelerating compared to 12-months ago in only 36% of the categories. That improves over 6 months as over 6 months 46% of the categories show output accelerating compared to its 12-month pace. However, over 3 months, only 36% of the categories show improved growth rates compared to what they log over 6 months.
by:Robert Brusca
|in:Economy in Brief
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