Introducing

Robert Brusca

Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.

Publications by Robert Brusca

Global| Jun 05 2023
Global Composite PMIs Show Resilience; U.S. Is an Exception
The Standard and Poor’s Global composite PMI data for May show some degree of resilience. Among the 22 countries and regions featured in the table, the average composite PMI rating rises to 53.5 in May from 51.5 in April. The median reading rises to 54.0 from 53.8. There are only two jurisdictions with readings below 50 indicating contraction; this compares to three in April. For both months, the readings on the number of contractions are quite low. However, the number showing slowing rises to 11 in May compared to 5 in April.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The percentile standings for expected wholesale sales in June show a 27-percentile standing for sales compared to a year ago. Orders compared to a year ago have a 32-percentile standing; that's much stronger than the counterpart reading in retailing for expectations. Sales for the time of year have a 44.9 percentile standing, also considerably stronger than the retail counterpart for expectations. However, the stock-sales ratio, with a 67.7 percentile-standing, is close to the ranking for expected sales in retailing.
by:Robert Brusca
|in:Economy in Brief
Germany| May 24 2023
German IFO Survey Backtracks in May; First Deterioration in Seven Months
First back-track in seven months Germany's IFO survey made its first back-tracking in seven months in May. The all-sector climate index stepped back to a net reading of -7.5 in May from -0.6 in April. Current conditions edged to a slightly lower all-sector index reading, dropping to +16 from +16.6 in April. Expectations made a larger drop falling to -14.2 in May from -7.7 in April for the all-sector index.

Rankings The ranking assessments of these headlines are low; the all-sector climate index is at a 16.4 percentile rank, the current conditions index is at a 26.9 percentile rank, and the expectations index at a 10.5 percentile rank. All these standings are substantially below their respective medians which occur at rankings at 50%.

Climate by sector The climate ratings in May show negative values across the board except for the service sector with a +6.8 reading, edging slightly lower from +6.9 in April. Manufacturing that had a +6.3 rating in April had fallen to a -0.3 climate reading in May. Among the sector rankings, the weakest ranking is for wholesaling at a 7.8-percentile rank while the strongest ranking is for construction with a 25.1 percentile rank, followed by manufacturing at a 23.7 percentile rank.

Current conditions by sector Current conditions show more positive diffusion readings for May with the all-sector reading at a positive 16, manufacturing at a positive 14.1, and services at a positive 24.3. But for the all-sector headline and the sectors, there was only one improvement, that was in the service sector which improved to the diffusion reading of 24.3 in May from 22.1 in April. Manufacturing backtracked to 14.1 in May from 15.4 in April while construction, wholesaling and retailing all dropped from positive readings to net negative readings in May. The rankings for the current indexes show more strength than for climate, with construction coming close to its median at a 47.5 percentile standing, followed by retailing at a 40.6 percentile standing. However, wholesaling again is the weakest with a 16.4 percentile ranking in May.

Expectations by sector Expectations show negative readings across the board and deterioration month-to-month with one exception, construction. Construction improved ever so slightly to a -32.4 reading in May from -32.5 reading in April. For the rest of the sectors, there is month-to-month deterioration from April to May with a drop of more than ten points for manufacturing comprising the biggest month-to-month drop of all. The standings show several very weak sectors. Wholesaling is at a 5.9 percentile standing and construction at a 7.3 percentile standing. The strongest percentile standing is in manufacturing at a 16.4 percentile standing followed by retailing at a 13.7 percentile standing. Obviously, compared to climate and current conditions, the standings for expectations show much weaker conditions across the board.
by:Robert Brusca
|in:Economy in Brief
Europe| May 23 2023
Manufacturing-Services PMI Gap Grows in EMU
Global PMI data were mixed in May with more reports of weakening data than of strengthening data. Japan is the clear exception in May with strengthening posted for its composite, for manufacturing, and for services. Japan is on a string of consecutive increases in all three measures and is the only country in the table like that. The United States comes close with stronger month-to-month changes in all the PMI metrics except for manufacturing in the current month of May.

The EMU manufacturing is consistently weakening month-by-month with France an exception in May showing some strengthening. Germany deteriorates and manufacturing in the EMU measure deteriorates.

The United Kingdom shows mixed trends although in May it shows a strengthening in all three measures.

Composite PMIs In terms of the ranking or standing of the sectors, the strongest standings ranked on observations since January 2019 show that Japan ranks best with its composite in May standing on its high for this full period. With a high-low ranking of 100%, Japan has a queue ranking of 98.1%. The queue ranking tells us that it has been this high or higher only about 2% of the time. The next strongest composite reading is from Germany with a 71.7 percentile standing, followed by the U.K. with the 69.8 percentile standing. The U.S. has a 58.5 percentile standing. France has a standing at its 45.3 percentile mark, below its historic median for this period.

Manufacturing PMIs Manufacturing sectors are weak across the board with most of them having a bottom 15% or lower standings in their queue of data ranked from January 2019. The exception here is Japan with a manufacturing sector having a 62.3 percentile standing.

Service sector PMIs Service sectors tend to have firm to strong readings with Japan’s service-sector having a 98.1 percentile standing. Germany’s has a 90.6 percentile standing. The European Monetary Union logs an 83-percentile standing. The United Kingdom posts a 73.6 percentile standing. In the U.S. a 64.2 percentile standing is in place while France has a 56.6 percentile standing.
by:Robert Brusca
|in:Economy in Brief
Belgium| May 22 2023
Belgian Consumer Confidence Sinks
The upshot for the Belgian survey is that most conditions are considered to be a subpar (below a 50% standing), however, there's rather striking and surprising optimism on inflation even though Belgium is a country in the European Monetary Union and inflation in the union is high as the ECB has been slow to raise rates and still has work to do with interest rates well below the current inflation rate. Belgians don't seem to be too concerned about those factors. There is concern about the economic situation. The current assessment is that it is below par as unemployment concerns are beginning to creep higher. The survey overall is comparatively down beat with the exception of the inflation light expectation response.
by:Robert Brusca
|in:Economy in Brief
Japan| May 19 2023
Japan’s CPI Rises by 0.6% as the Year-on-Year Rise Ascends to 3.4%
Japan’s year-over-year CPI accelerated to 3.4% in April from 3.2% in March on a monthly gain of 0.6%. Even with that, Japan's CPI is decelerating as its 12-month gain of 3.4% diminishes to a 2.3% annual rate over 6-months and diminishes again to a 1.2% annual rate over 3-months. The year-on-year headline is getting all the attention in this report, but the sequential decline is worth paying attention to- but how much?
by:Robert Brusca
|in:Economy in Brief
Japan| May 18 2023
Japan's Trade Flow Momentum Shrinks...but so Does Its Deficit
The speed of export and import growth for Japan has steadily slowed with the exception of a pickup in export growth over the last three months. These trends have accompanied an improvement in Japan's trade deficit from 12-months to 6-months to 3-months.

In April Japan's exports rose 2.5% after falling 0.7% in March and rising 3.6% in February. Imports rose by only 0.1% in April after falling in step with exports in March, by -0.7%, but also fell by 3% month-to-month in February. Over this stretch exports have clearly outpaced imports.
by:Robert Brusca
|in:Economy in Brief
Japan| May 17 2023
Japan's GDP Beats Expectations Even as Net Exports Are Weak
Japan's first quarter GDP beat expectations, rising 1.6% at an annual rate when a gain of less than one-half of 1% had been expected. However, the gain in the fourth quarter was revised to a slight decline taking some of the surprise value away from the first quarter reading.

The annualized quarterly gain of 1.6% was the strongest growth since the second quarter of 2022 when GDP rose 4.7%. That second quarter growth rate is flanked by declines in the third quarter and in the first quarter just before it.
by:Robert Brusca
|in:Economy in Brief