Economy in Brief

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.

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.

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.