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| Jul 15 2024
EMU IP Trends Are Weak Except for Consumer Goods
European IP trends are muted in May as the headline fell by a sharp 0.6% month-to-month after coming up flat in April. Manufacturing output fell by 0.8% month-to-month. Output in May fell in consumer durable industries, for intermediate goods and for capital goods. In seven of thirteen EMU members presented in the table output also fell in May. Month-to-month changes in output, while admittedly are quite volatile, show flip-flopping as 46.2% of table reporters demonstrate accelerating output in May compared to 53.8% in April and 30.8% in March.

EMU output is in the process of a ‘soft acceleration.’ I term it as such because growth rates get progressively larger from 12-months, to 6-months, to 3-months. But all these growth rates are negative. So, the declines are becoming less pronounced. Manufacturing displays the exact same general characteristics.

Sector growth rates sequentially show consumer goods output growing on all horizons and engaged in a steady sequential acceleration. Consumer durables are closer to showing a declining trend on all negative sequential rates of growth. Nondurable consumer output is close to a pure sequential acceleration on very strong growth over three months and positive growth over all three sequential periods. Intermediate goods have no clear trend, but output does decline on all horizons. Capital goods output is also trendless but logs a rise over three months after significant declines logged over six months and 12 months.

The EMU median shows three negative numbers across the 13-reporting members. With acceleration across these members fading from 58.3% over 12 months and 66.7% over six months to 33.3% over three months.

Quarter-to-date (QTD) growth shows a gain for the EMU over all as headline IP is up at a 0.2% pace and manufacturing is up at a 0.7% annual rate. However, across 13 members in the table, eight report QTD declines in manufacturing sector output. However, there are three showing growth QTD that is very strong growth, of 20% or more, and another showing growth of nearly 17% (Belgium).

Output in EMU countries flounder through May. The trends are mild or muted even where they are somewhat positive.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Jul 12 2024
EMU Inflation: Headline Is contained; Core Is the Issue; Services Prices Are Nettlesome
EMU inflation ticked up by 0.1% in June after also rising by 0.1% in May – good stuff! The large countries show May changes ranging from 0.3% to -0.1%. May saw inflation rising in a range of 0% to 0.2% for the Big Four economies. That’s a nice, tight, low range.

Sequential inflation shows headline inflation running at 2.5% over 12 months and at 2.8% over six months, that decelerates to 1.7% over three months, more good news. But across the large economies in the EMU, inflation generally accelerates over three months to a 5.4% pace in Germany, 3.5% in France, and 3.0% in Italy. Only Spain shows a slower 1.7% pace. However, the year-on-year rates are more target-friendly. There, Spain has a high gain at 3.6%, Germany and France have 12-month rates that cluster around 2.5%, and Italy has a gain of 1%.

However, when we look at the core – excluding food & energy or just ex-energy - the results are much less target-friendly. Year-over-year France and Italy are close to target, with France at 1.9% and a 2.1% pace in Italy. German inflation is up at a 2.6% pace ex-energy while the core in Spain has inflation up by 3%. However, the tables are turned over three months where Germany and Spain show inflation as moderate at a 2.1% pace and France and Italy have core inflation up at a 2.6% to 2.8% pace. Still, these numbers are getting closer to the ‘two-percentish’ target the ECB current has.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Jul 11 2024
U.K. Manufacturing: Output Trend Eases
U.K. manufacturing output rose by 0.4% month-to-month in May, reversing the output drop from April. Sequentially output is in a low-growth profile gain at a pace of 0.6% over six months and 12 months. The three-month growth rate registers a negative 4.2% at an annual rate. Quarter-to-date IP is falling at a 4.5% annual rate. Manufacturing output is still 4.2% below its level of January 2020, before COVID struck. That’s four years and output is still lower on balance.

April showers; still few May flowers Sectors show mixed results with consumer durables output lower in May, nondurable goods output higher month-to-month by 1.1%, intermediate goods output higher, and capital goods output lower. It’s a mixed bag in May.

Sequential Growth Rates Sequential growth rates from 12-months to 6-months to 3-months show consistent negative growth rates for consumer durables. They tend toward weaker results but do not progress steadily since there is less weakness over six months than over 12 months. Similarly, consumer nondurable goods output shows consistent growth and tends toward acceleration except for a weakening in growth over six months. Intermediate goods output runs a pattern like that for consumer durables, growth rates that are consistently negative and tending toward more weakness. Capital goods output growth is positive over 12 months and six months, but growth slows over six months and declines over three months, exhibiting clear sequential deterioration.

Key Industries Key industries are mixed as well. Sequentially only food, beverages & tobacco output grows over each horizon. Textile & leather output declines on each horizon. Textile & leather is sequentially deteriorating along with vehicles and essentially utilities where 12-month and 6-month output growth is at nearly the same pace before dropping over three months. Only mining and quarrying has output stronger over three months than over 12 months.
by:Robert Brusca
|in:Economy in Brief
Australia| Jul 09 2024
Australian Business Confidence Runs a Downtrend Despite Uptick
Aussie business confidence Business confidence in Australia rose to 3.6 in June from -2.3 in May. Its rank percentile standing at the 31-percentile mark remained in the lower third of its historic queue of values. The 3-month moving average (MAV) is rising, but the 12-month MAV is falling. Business conditions eroded in the month.

The rank percentile standings (Rank %) for the headline of business conditions has a 31-percentile standing. Apart from prices, the highest percentile standings are for capacity utilization (87.3% standing), exporter sales (54.3 percentile), and exports (49.0 percentile). But prices and costs have standings of 86th percentile, 75th percentile, and 69th percentile.

The final column shows changes among the 13 components of the index are higher for 9 items and lower for 4 items, but this is after more than four years and the strongest gain is 2.4 points for inventories. On the negative side, capital expenditures are lower by 10.1 points, forward orders are lower by 8.9 points, profitability is lower by 2.2 points, and business conditions are lower by 0.4 points.
by:Robert Brusca
|in:Economy in Brief
Japan| Jul 08 2024
Economy Watchers Survey Rebounds in June But Still Reads as Weak
Japan’s economy watchers index current reading moved up to 47.0 in June from 45.7 in May. This move leaves the current index below its April value and continues a string of readings below 50, indicating ongoing contraction in the current index – that string is now at four months.

The future index for the economy watchers similarly rose to 47.9 in June from 46.3 in May and it's still below its April value of 48.5. Once again there's a month-to-month improvement and the continuation of a three-month string of readings below 50, indicating expected contraction in the future by the economy watchers survey.

The current index Still, the month is striking for its degree of improvement. The current headline improved month-to-month in six of nine components. Weakening on the month is the reading for housing that slipped to 45.3 from 46.7 in May; the assessment for corporations slipped to 47.3 in June from 47.9 in May; nonmanufacturers fell to 47.6 in June from a reading of over 50, at 50.1, in May. As a result of these changes, there are no readings in June in the current index above 50, which in the lexicon of diffusion index would reflect an assessment that activity was unchanged. All the sectors and categories assessed in the current index, even though many improved in the month, are still indicating ongoing contraction.

The future index The future index shows six of nine categories improving in June as well. And the futures index shows no sector in June with a reading at or above 50, underscoring that expectations are for continuing contractions in the future. The readings that weaken month-to-month are for housing that slipped to 44.0 in June from 45.7 in May, and for nonmanufacturers that slipped to 48.0 from 48.7 - these two slips match the declines and their current index as well. However, the future index also showed a slip in employment a reading that had been running read above 50, but it slipped to 49.9 in June from 50.3 in May.

Queue standings… We can further try to understand the meaning of the economy watchers index by looking at the queue standings of the diffusion readings for June. The queue standings are presented as percentages, and they reflect the percentile standing of the June economy watcher diffusion readings relative to observations back to January 2002.

Current queue Assessed in that way, the current index has four readings that are above 50% which puts them above their medians for that historic period. The strongest reading is for eating and drinking places, followed by services. However, the headline reading is only at 44.7 percentile and the weakest component is for employment with a 20.6 percentile standing. That tells us that the employment reading has been weaker than its June diffusion value of 46.2 only about 20% of the time, marking this as a significantly weak reading. The employment reading is important. However, for both current and future readings, the household, retail, and nonmanufacturer readings (in that order) are the most important.

Future queue The future index has a slightly weaker standing with its queue reading at a 41.9 percentile position. The future index has only one reading above its median and that's for manufacturers that have a 51.0 percentile standing for June. The weakest percentile standing among the future components is for housing with a 34-percentile standing, but not far off is employment with a 34.8 percentile standing, and services with a 39.1 percentile standing. The future assessments show that a great deal of weakness is still expected according to the economy watchers that were surveyed.
by:Robert Brusca
|in:Economy in Brief
Germany| Jul 05 2024
German IP Falls; Trends Are Weak As Well
German industrial production fell by 2.5% in May, continuing a sawtooth pattern over the last few months. Reductions in headline output, consumer goods output, capital goods output, represent reversals from gains in April; for intermediate goods, the May decline is the second month in a row of output declines.

Trends are clear Sequential trends for German output are poor. The progression in growth rates from 12-months to six-months to three-months isn't always pointing to a steady deterioration, but the case for weakening German growth can be made comparing the three-month growth rates that are weaker to their 12-month growth rates. For the headline, for consumer goods, for capital goods, and for intermediate goods, for construction, all show that tendency. That's also true as construction, as output falls at a 26.8% annual rate over three months compared to a drop of 8% over 12 months. The pattern for manufacturing is illustrative with output down by 7.1% over 12 months, improving slightly to a loss of 5.1% annualized over six months, and then dropping at a 10% annual rate over three months. While the decline in the manufacturing pattern is not clear sequential deterioration, it certainly leans in that direction.

Real orders and sales Real orders for manufactured goods also lean the direction of weakening, with declines of about 8.5% over six months and 12 months that mushroom into a decline of 11.7% at an annual rate over three months. Real sales in manufacturing fall by 6% over 12 months, reduce that pace of drop of 3.3% over six months, and then fall at a stepped-up 8.3% annual rate over three months.

Surveys are mixed but highlight some weakness Surveys of the German economy show secular deterioration from 12-months to six-months to three-months in the ZEW current index. On the EU Commission industrial sector index, there is sequential deterioration as well. Contrarily, the IFO manufacturing index shows sequential improvement and the IFO expected manufacturing index echoes sequential improvement, rising from 86.6 over 12 months, to 88.7 over six months, to 92.7 over three months.

IP elsewhere in Europe Industrial production elsewhere in Europe shows mixed trends with France, Spain, and Portugal logging positive growth rates over three months, six months and 12 months although without any clear patterns for acceleration or deceleration. Norway shows sequential deterioration with output falling at a 1.4% pace over 12 months, at a 3.2% annual decline rate over six months, and at a 6.6% annual decline rate over three months.

Quarter-to-dates (QTD) growth Quarter-to-date growth rates (or changes in survey indexes) show mostly declines. For the traditional gauges of industrial output, output by sector in Germany, as well as for orders and real sales, the exception is an increase in the output of consumer goods in Germany. German surveys, on the other hand, tend to improve in the quarter, except for the EU Commission index. Industrial production in other European economies shows a strong gain in Spain, a gain in France, a decline in Portugal, and a sharp developing decline in Norway where output is falling at a 14.5% annual rate in the quarter-to-date.

Growth rankings are weak The queue standings that rank the annual growth rates or are applied to the levels of the variables for surveys, show all these metrics with rankings below their 50% mark putting them below their historic medians for data ranked over the last 24 years. The exception to this is output in Spain and Portugal; their output, contrarily, has very strong standings at the 98th percentile for Spain and a companion standing for Portugal at its 93rd percentile.

Results since before COVID struck We compare results in May 2024 to levels of performance in January 2020. The final column compares changes in these metrics to their levels as of January 2020 before COVID struck. All metrics show weak readings in May 2024 below January 2020 except for IFO manufacturing expectations and industrial output in Spain. All the other metrics are showing net lower readings compared to their values more than four years ago (ouch!).
by:Robert Brusca
|in:Economy in Brief
USA| Jul 03 2024
PMI Composites Worse on Balance in June
In June, the S&P PMI composites improved in 6 of 25 countries and regional jurisdictions reporting in the table. Fifteen improved month-to-month in May and eleven improved month-to-month in April.

Over three months, 14 jurisdictions improved compared to their six-month averages. Over six months, 18 improved compared to their 12-month averages. Over 12 months, 14 improved compared to their average readings of 12-months ago.

The sequential averages show a significant trend toward improvement. However, monthly comparisons are not as upbeat.

In June, there was a relatively sharp increase in the number of jurisdictions with PMI values showing decline (PMI<50) as the raw count increased to 8 out of 25 from four in each of the two preceding months. The period averages have been showing fewer output declines with the number dropping from 9 over 12 months to 6 over six months and to 5 over three months. PMI readings below 50 had been becoming scarcer.

Average and median PMI reading had been improving with higher diffusion reported over six months compared to 12 months and another improvement over three months for the average but a step back for the median. Monthly there is no trend for the change, but the June readings are weaker than the April readings.

Queue percentile standings classify standings against all past readings expressed as a percentile positioning on data back to 2020. The average queue standing is in its 43.7 percentile while the median standing is at its 42.9 percentile. Only India and Egypt have queue percentile standings in their 80th and 90th percentile ranges. Spain manages a reading in its 70th percentile, Brazil comes close at a 69-percentile standing. But only eight of 25 percentile standings are above the 50% mark, which means above their historic median readings.
by:Robert Brusca
|in:Economy in Brief
Europe| Jul 02 2024
EMU Unemployment Holds at Lows
Unemployment in the EMU in May stayed at its cycle (and all-time) low of 6.4%. There is evidence of small backtracking in Germany, but that is modest backtracking. Trend unemployment is still low and broadly low across the EMU.

In May unemployment rates fell relative to April in Finland, Greece, and in the Netherlands- in each case the rate fell by one tenth of one percentage point. Unemployment rates rose month-to-month in Austria, Belgium, France, Luxembourg, and Portugal. The rate also rose in Europe’s non-EMU/EU member U.K., a rise of 0.2 percentage points.

However, across the 12-representative EMU members in the table, the median rank standing of the unemployment rates is in its 19th percentile, the average is in its 26.9 percentile – both rankings confirming low rates of unemployment. The weighted rate for all of the EMU is much lower because the coincidence of having all these rates at relative lows at the same is so unusual. Only Luxembourg has an unemployment rate that is strong, about its historic median (above a ranking of 50%). The lowest rankings are still below their respective 10 percentiles for Ireland, Italy, and France. In addition, the Netherlands, Germany, and Belgium have rankings below their 20th percentiles. While many measures showing industrial data have not done so well compared to their pre-covid levels, for unemployment rates across countries have unemployment rates below their January 2020 levels except for four countries: Austria, Belgium, Germany, and Finland. Luxembourg’s rate is unchanged.
by:Robert Brusca
|in:Economy in Brief
Japan| Jun 28 2024
Japan’s Production Struggles to Make and Keep Gains
In the graph that accompanies this article, I have chosen to plot industrial production as a level instead of as a growth rate- the latter treatment would be more common. The reason for it, as you can see, is that industrial production has been without a positive trend for some time. The prevailing trend over a longer period (back to 2021 or further depending on how you construct a trend) is clearly negative although the short-term trend shows a very clear revival in progress from early this year.

These complications make growth rates less useful to calculate because production has contrary long-term and short-term trends, and its path is peppered with a good deal of volatility which increases the chance that any growth rate you calculate is not very meaningful.

Having said that, I also included table that calculates growth rates! Seeing the chart and plotting industrial production as a level together allows us to understand what's going on with the growth rates a little bit better.

Industrial production declines over 12 months and over six months but then makes a very strong recovery over three months for both total IP and for manufacturing. Total industrial production is rising at a 19.3% compounded annual rate over three months while manufacturing output rises at a 28.5% annual rate over three months. However, both show that output falls by 0.4% over 12 months, and for the year before that both headline industrial production and manufacturing rose on 12-month growth rates of 2.2% and 5.3%, respectively.

Looking at manufacturing sectors for consumer goods, intermediate goods, and investment goods, we have all three sectors showing output advancing in May, falling in April, and advancing in March. The recent months have been volatile. Looking at growth rates over 12 months, six months and three months, all the sectors have slightly different growth characteristics. Consumer goods output declines over 12 months and six months but grows strongly over three months. Intermediate goods output rises over 12 months, falls over six months, and then rises strongly over three months. Investment goods output declines over 12 months, grows at nearly a 4% pace over six months, and then explodes at a nearly 50% annual rate over three months. The output of investment goods is the only sector that shows persistent acceleration.

Moving out of manufacturing to mining and electric utilities & gas, we find that mining shows declines over 12 months and six months, with a nearly 10% annual rate increase logged over three months. Electricity & gas show that persistent acceleration from minus 0.2% growth over 12 months, to nearly identical ‘zero growth rate’ over six months and to a nearly 10% annual rate of growth over three months.

Despite the turbulence and the inconsistency across different timelines and in comparing timelines across different sectors, the one constant here is that over three months Japan's output is doing quite well no matter what sector you look at. Despite that, it's still true that, for the most part, industry shows increases in March, versus declines in April, topped by increases in May. It isn't exactly like Japan is now on this steady recovering platform; it's just that the data line up this way and because of that it doesn't give us any confidence that even with the strong trend over three months that it's going to have staying power.

Still, in the quarter-to-date the annual rate increase of overall industrial production manufacturing and all the sectors is impressively and consistently large.

However, as the chart at the top reminds us Japan has been in a period of relatively difficult growth. If we look at the level of output now calculating the percent change in output from where it was in January 2020, we are looking at a period slightly in excessive of four-years. And yet overall and manufacturing output both are lower, the output of intermediate goods is lower, consumer goods output is flat, and only investment goods output is up by 3.1% over that four-year span. Mining output is down, and the output of electric and gas utilities is lower on balance as well.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 27 2024
Globally Money Growth Recovers, Moderates – Still Weak
Money supply growth is picking up globally except, of course, in Japan. In the European Monetary Area, money supply is up 0.6% over 12 months, it's up at a 2.1% annual rate over six months, and it's rising at a 2.8% annual rate over three months. Credit to residents in the European Monetary Area also is making a recovery, with 12- and six-month growth rates at 0.3% and with the three-month growth rate at an annual rate of 0.8%. Private credit is growing just slightly faster, with the three-month growth rate at 1.2% annualized.

In the United States, M2 money supply growth has accelerated from 0.6% over 12 months to 2.5% pace over six months and to a 4.2% annual rate over three months. Money growth in the United Kingdom, similarly, is accelerating from 0.3% over 12 months to 4.1% annualized over six months to 6.1% annual rate over three months.

Japan is the exception, with growth over 12 months at 1.8%, slowing over six months to a 1.6% annual rate and then slowing further over three months to a 0.5% annual rate.

Adjusted for the effects of inflation, money supply in the monetary union is gradually picking up as it moves from a decline of 1.9% over 12 months to an increase at a positive annual rate of 0.6% over three months. In the U.S., M2 growth is -2.6% in real terms over 12 months but flips the switch to grow at a 1.3% annual rate over three months. In the U.K., money supply M4 falls at a 3.3% annual rate over 12 months but then grows at a 2.5% annual rate over three months. Japan shows real money growth at -1% for 12 months, then at -0.4% over six months and at -3.1% annualized over three months.
by:Robert Brusca
|in:Economy in Brief
Germany| Jun 26 2024
German GfK Climate Takes Modest Step Back After Bounce
German consumer climate as measured by the GfK index in July has taken a step back to -21.8 from a reading of -21 in June. However, the step up in June to -21 from -24 in May remains largely in place. The GfK climate index has been climbing, but it remains in substantially weakened condition with a queue- or count-percentile ranking at 9.8, indicating that it has been weaker than this only about 9.8% of the time.

The components of the GfK index lag and are available only through June. However, through June economic and income expectations readings weakened while the propensity to buy took a small step backward moving more deeply into negative territory. Economic expectations fell back to 2.5 in June from 9.8 in May while the income expectations reading fell to 8.2 from 12.5 in May. The propensity to buy retreated to -13 in June from -12.3 in May.

The components show economic expectations rank at their 42.6 percentile, still below their historic median. Income expectations are at a ranking of 43.0, a percentile standing also below its historic median (queue standing medians occur at a ranking of 50). The propensity to buy has the weakest standing among components at its 24.3 percentile.
by:Robert Brusca
|in:Economy in Brief
Japan| Jun 25 2024
Japan’s Core CPI Puts Bank of Japan in a Tough Spot Again
After release of Japan's headline report for the CPI for May, it appeared that the way had been made clear for the Bank of Japan to begin to raise rates and began to move interest rates into more sustainable, neutral, long-term territory. A rate hike could also go some way toward helping to support the yen that has been struggling. Headline inflation in Japan is at 2.9%; while it dipped to a 2.1% pace over six months, it's running at a 3.8% annual rate over three months.

However, new data on the core suggested Japanese inflation is running substantially weaker than headline inflation suggests. The generic all items excluding food and energy metric was flat in May, up by 1.6% over 12 months, up by 1.2% at an annual rate over six months, and up at only a 0.8% annual rate over three months. Core inflation shows that inflation pressures are not broadly shared. The statistic for all items except fresh food and energy rose by 0.1% in May, and has a stronger 2.1% gain over 12 months, quite close to the Bank of Japan target. However, over six months, this core metric is up but only a 1.3% annual rate; over three months, it's up at only a 0.4% annual rate. Neither of the measures of the core inflation rate shows that there's much inflation stirring in the Japanese economy. They are far from giving the BOJ an ‘all clear’ signal for any kind of rate hiking. Their sequential progression to lower inflation rates over the past year underscore ongoing price weakness.

These are data through May so two-thirds of the monthly data are now in hand. Quarter-to-date all item inflation is rising at a 2.9% annual rate; inflation for all items except food and energy is up at just a 0.9% annual rate; and for all items except fresh food and energy, the rate of increase in the quarter-to-date is only 0.5% at an annual rate.

The quarter-to-date data for all items except fresh food and energy comes in very close to the five-year average for that series which showed an average annual increase of 0.6% per year. For all items ex food and energy, the gain of 0.9% in the quarter-to-date is higher than the 0.6% it averaged over five years. However, headline inflation of 2.9% quarter-to-date is up considerably more strongly than the five-year average pace of 1.4%.
by:Robert Brusca
|in:Economy in Brief