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

Japan| Jul 18 2025
Japan’s Ex-Fresh-Food Ex-Energy Inflation Runs Hot
No one will be critical of Japan’s efforts to free itself of its torpor into disinflation and deflation that it suffered for many years. The Bank of Japan struggled long and hard to remove the contraction in prices from its economy since falling prices can have a pernicious effect on growth and investment. Japan still faces challenges: it has a contracting population and faces dealing with tariff demands from the United States as negotiations on that front continue to drag and have become harder to settle than Japan had expected. Despite the current inflation overshoot, on data back to January 2011, Japan’s to-date inflation is only averaging 1%; that is still well below its 2% target and ample reason for the Bank of Japan to continue to move carefully to corral inflation especially if inflation has stopped accelerating – as it seems to have done. Against this background, we look at Japan’s CPI report.

Current inflation: June Japan has dispatched deflation and currently faces an inflation problem. In June, the BOJ’s preferred gauge for the CPI excluding fresh foods & energy rose 0.4% month-to-month for the second month in a row; it rose by 0.2% in April. Japan’s headline inflation rate seems to have fallen into line A traditional ‘core reading’ excluding all food & energy flies under the BOJ’s target pace. But the BOJ’s preferred inflation gauge shows a 3.4% rise over 12 months and then gains at a pace of 3.7% over both six months and three months. All of those numbers are too hot to handle.

Line-items Education costs in Japan are falling sharply and sequentially. Medical care costs are deescalating too. And while food & beverage prices continue to overshoot, 2% by a wide margin, the pace of total food & beverage inflation has been falling. No broad category has steadily accelerating inflation. But the BOJ’s preferred gauge of inflation, a specialized core measure excluding energy & fresh foods, sees inflation ramping up and staying high over three months and six months.

Diffusion/breadth Among the eight major categories, year-on-year inflation has accelerated compared to where it was one-year ago in four of the eight. Inflation is above the 2% benchmark for four of eight categories as well.

Acceleration or not... The chart on sequential inflation for the BOJ’s preferred core gauge shows that this measure has accelerated since August or December of last year and since then has more or less marked time oscillating without any clear trend.
by:Robert Brusca
|in:Economy in Brief
Australia| Jul 17 2025
Aussie Business Confidence -National Australia Bank Survey
The National Australia Bank (NAB) survey for June shows a jump in Australia’s business confidence to 5.1 from 2.2 in May and those compared to a reading of -0.7 in April. The sequential averages show a steady improvement from a 12-month average of 0.2 to a six-month average of 1.3 and to a three-month average of 2.2. The monthly May reading is at 2.2. With the June reading moving up to 5.1, it looks like this progression toward improvement remains in train.

Smoothed assessments Smoothing out the monthly data shows that the three-month smoothing operation switches the progression from 12-months to six-months to three-months to reveal improvement that has stalled out. Looking at 12-month averages, there's an improvement over six months compared to 12-months, and then a slight set-back over three months.

Components The components over three months show improvement in train for about half of the categories, compared to 43.8% improving over six months and 25% improving over 12 months. The sense of improvement across categories has been broadening over the more recent periods.

Standings Percentile standings on the data back to 2002 show above-median standings in seven of the thirteen survey categories. Over this period, business confidence itself ranks slightly below its median with a 49.5 percentile standing; the median occurs at a standing of 50-percentile. The index of business confidence is currently close to its median on this, but slightly below it. However, the rankings for the three-month moving average and the 12-month moving average both are considerably lower, indicating that much of the improvement that we see in the Australian index is relatively recent.

Summing up Australia remains caught up in tariff negotiations with the United States along with every other country, a factor that extends uncertainty and could be holding back progress in the economy. However, the current survey suggests that progress is in train, nonetheless.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Jul 16 2025
U.K. CPIH Inflation Runs Hot
Inflation in the United Kingdom is still running hot in June. The CPIH rose by 0.4% in the month with its core rate that excludes energy, food, alcoholic beverages & tobacco also rising 0.4% month-to-month. In both cases, these increases compare to a rise of 0.1% in May. On that perspective, the two-month trend is somewhat muted. However, in April the CPIH headline rose by 0.6% and the core rose by 0.4%, so the U.K. finds itself in another period of excess inflation.

Sequential inflation The sequential inflation rate from 12-months to six-months to three-months shows the headline at 4.1% over 12 months, 4.2% over six months and 4.3% over three months, a very slight acceleration, but clearly inflation that is over 2 percentage points above the target set by the Bank of England across the entire span. The core rate for the CPIH is up 4.3% over 12 months, up at a 4.4% annual rate over six months and looks slightly muted at 4.2% over three months. Again, we are looking at a solid inflation overshoot that is more than 2 percentage points above the target set by the Bank of England.

Inflation breadth In the month of June, inflation accelerated in 45% of the categories, the same proportion as in May; however, in April acceleration occurred in 54% of the categories. These sequential data show that over three months inflation in the U.K. accelerated across 54% of the categories, the same proportion as over six months although both of those marks were below the 63% acceleration breadth logged over 12 months. The data clearly show that there isn't any deceleration to any great extent in play over any of these horizons and that the monthly data offer only a modicum of solace for June and May.

The far-right hand column evaluates current inflation rates year-over-year compared to where they have been since January 2000, monthly. The comparison is a ranked percentage of the current inflation rate vs. this history. For example, the current CPIH 12-month inflation rate of 4.1% sits at the 88.6 percentile of its historic queue of data. This tells us that inflation has been this high or higher, less than 12% of the time over this period, clearly marking the 4.1% growth rate as high and as substantial by historic experience. The CPIH core has a slightly higher standing and it's 89th percentile. Looking across the components, all but two have rankings over this 50%. Rankings that are above 50% place them above their medians for the period. The exceptions here, are a 26.5 percentile standing for restaurants & hotels inflation where prices are running at 2.6%, and transportation where prices are running at 1.6%. Furniture, household equipment & maintenance prices have a 56.2 percentile standing, only marginally above the category’s historic median. After that, there's only one category in its 60th percentile, two categories in their 70th percentile and the rest are higher.

Summing up Needless to say, the U.K. has an entrenched inflation problem. It's lodged in the headline; it's lodged in the core; it's lodged across most of the commodity categories! The Bank of England simply has work to do and there isn't much evidence that the BOE is making any progress; in fact, the trends seem to suggest that there may be much more work to do.
by:Robert Brusca
|in:Economy in Brief
Europe| Jul 15 2025
EMU IP and Sectors Recover
Output jumped in the European Monetary Union in May. The main gain followed a 2.2% drop in April that was preceded by a 1.8% increase in March. There's been some turbulence in output over the last few months with April showing declines for all the major sector components.

Moving beyond monthly data, the sequential run of growth rates from 12-months to 6-months to 3-months shows that total industrial production is on an accelerating path from 3.8% over 12 months, to over 5% over six months as well as over three months. Manufacturing alone shows a 12-month 3.6% growth rate, rising to 4.7% over six months and to 5.8% over three months.

Sectors Sectors show a trend toward acceleration in consumer goods production where a 10.3% growth rate over 12 months progresses to 20.1% over six months and only backs off to 18.5% over three months. Splitting consumer goods output into durables and nondurables, we find less strength among durables with flat performance over 12 months, a 3.7% annual rate decline over six months, and a 4.3% annual rate increase over three months. However, for nondurables the growth rate surges from 11.6% over 12 months to 23.1% over six months and stays over 20% over three months. Intermediate goods’ trend is the fly in the ointment for industrial production, as output falls by 1.7% over 12 months, falls at a 2% pace over six months, and then falls at a 4.9% annual rate over three months. That setback is surprising given the growth rate and other categories. Capital goods show a strong accelerating phase from 4.1% over 12 months to a 5% growth rate over six months to 15.5% over three months.

Countries Looking across specific countries, the table shows 13 monetary union members in May - Seven of them show output contracting. That's the same number contracting as in April although in March only four showed industrial output contracting month to month.

The sequential growth rates calculated over broader periods show eight countries with output contracting over three months, but only five with output contracting over six months; six countries report lower output over 12 months – a much longer span of time.

Mixed trends within the community The sector data for all of the Monetary Union are relatively upbeat, but the country level data show a lot more mixed performance across individual country units; only Ireland, Finland, and Germany show output increases over three months, six months and 12 months. Conversely, Greece, France, and Belgium show output declines over three months, six months and 12 months.

The quarter-to-date (QTD), with two months of data in hand, is showing six countries with output declining on QTD-to-date basis. But for the EMU region as a whole, output is advancing at a 1.6% annual rate. Manufacturing output is rising at a stronger 1.9% annualized pace – with real strength in capital goods output.

Ranking performance The far right-hand column ranks current growth rates on data back to 2007. Seven of thirteen countries rank below 50% which is their median growth rate for the period. Finland, Ireland, and Portugal are quite strong; Malta and German have rankings solidly above their respective 50th percentiles. The Netherlands, Italy, France, and Austria have rankings in their 40th percentiles, lagging their median pace but in a 40% to 50% range. Belgium emerges as the weakest country on a ranking basis, standing only in its lower 8.7 percentile and it is riding a losing streak to boot.

Overall EMU IP rankings are solid-two sectors lag Overall EMU rankings show total output with a 66.1 (top one-third) percentile ranking with manufacturing at 59.6 percentile. Consumer nondurables are the strongest sector at a 98.2 percentile ranking. Both consumer durables and intermediate goods have lower standings: 40.8% for consumer durables and 37.6 percentile for intermediate goods. Both of those sectors are lagging and also carrying weak momentum. In contrast, capital good output is surging and its ranking at 47.7% is mostly below its median rank (at 50%).

Stimulus diverted? NATO has signed on for more miliary spending and this has been expected to underpin growth in Europe. But some of that stimulus will be redirected in just-announced deal in which the U.S. will manufacture arms and NATO would pay for them to help Ukraine. It is unclear how much stimulus that we had expected for Europe might be redirected to the U.S. by this new deal.
by:Robert Brusca
|in:Economy in Brief
Japan| Jul 14 2025
Japan’s IP Is Still Waffling and Weak
Japan's industrial production continues to be weak with output falling by 0.2% in May after falling by 1% in April and coming up lame - at flat - in March. Sequential growth rates are not telling an upbeat story either, with 12-month industrial production lower by 0.8%; over six months the decline is only 0.2% at an annual rate, but then over three months the annual rate of decline is 4.6%.

Manufacturing shows similar weakness to the trend for overall industry, but the three-month growth rate is at -5.7% at an annual rate.

Two key industries for Japan, textiles and transportation, show up with the declines over all three horizons. And for transportation, the decline over the last three months is 11.1% at an annual rate.

Manufacturing industries in Japan show a great deal of variation with consumer goods output on a more or less accelerating path, growing 3.2% over 12 months and then up to a 12% annual rate over three months. Intermediate goods output is in a significant decelerating phase, falling 3% over 12 months, falling at a 1.2% annual rate over six months and then stepping up the pace of decline to -6.6% at an annual rate over three months. Investment goods show a good deal more life, falling only 0.1% over 12 months, then growing at a 3.9% annual rate over six months and surging at a very vibrant 8.3% annual rate over three months.

Mining activity in Japan is recovering, showing a 6.8% annual rate decline over 12 months, a 5% annual rate decline over six months, and an 11% annual rate increase over three months.

Utilities output from gas and electric utilities shows a decline of 1% over 12 months, growth of 2.3% over six months. and then output declined at a 19.2% annual rate over the last three months.
by:Robert Brusca
|in:Economy in Brief
France| Jul 11 2025
French Inflation Moves Up But Stays Low
French inflation jumped in June, rising by 0.4% in the month on the HICP metric, the same as the monthly rise for France’s CPI and its CPI excluding energy. Not surprisingly the monthly diffusion reading tracks the breadth of inflation rise monthly to 72.7% in June affirming that the breadth of the gain in monthly inflation was substantial. Breadth is sharply higher in June after looking very weak at 18.2% in May. But the month of May followed a broad acceleration with breadth at 90.9% in April. Monthly breadth reading can be quite unstable. Diffusion values above 50% revel inflation acceleration period a period in which inflation acceleration is more common than deceleration.

However, breadth over the sequential periods 3-months, 6-months and 12-months shows inflation acceleration is creeping up as the breadth reading advances on the timeline from 36.4% over 12 months, to 54.5% over 6 months, and to 63.6% over 3 months.

France has been an inflation success story and a growth failure story. The HICP headline inflation last higher than 2% in August 2024 and the domestic CPI excluding energy was over 2% for its 12-month gain in March of 2024. And while the HICP has signs of ongoing slowing, the domestic CPI excluding energy has been relatively stable since September 2024. The CPI excluding energy inflation is running at a weak and well contained pace of 1.6% over 12 months and the weakening HICP undoubtedly has benefited from the ongoing drop in energy prices where Brent costs in euro-terms show an 18.5% drop over 12 months.

The headline HICP for France shows a mixed trend from 12-months to 6-months to 3-months. The domestic CPI is closer to showing steady acceleration. The CPI excluding energy shows persistent acceleration. But the domestic CPI gauge also shows inflation at a pace of just 2.2% over 6 months and 2.6% over 3 months compared to a low 12-month pace of 1.6%. The acceleration in French inflation is mild and the pace of inflation is really controlled.
by:Robert Brusca
|in:Economy in Brief
Germany| Jul 10 2025
German Inflation Settles Lower
Germany is HICP inflation measure (12-month) came in at 2% in June, below its May reading 2.1% but above its April reading of 1.9%. There have been a few recent readings for Germany at 2% or below and these are the first traces of 2% inflation in Germany since mid-2021 when inflation first began to climb above the 2% target that is the objective by the ECB for all of the European Monetary Union.

Inflation progress is evident The German domestic CPI is also up by 2% year-over-year, and this is the fifth time that it has posted an increase of 2% or less since August 2024. This is good news because it suggests that German inflation isn't just flirting but perhaps trending and will eventually stabilize around the 2% mark. However, Germany also still has work to do because the domestic CPI gauge excluding energy in June is still at 2.5% year-over-year; that pace dropped from 2.8% in May and it's generally been higher over the past year with some fluctuations up as high as a 3.1% year-over-year pace, as was the case in December. But it's also been as low as 2.6% in August of last year. Core inflation in Germany remains stubborn. We see that clearly from its domestic CPI excluding energy reading. The core reading in the HICP series is not yet available for June but the core reading from May came in at 2.9%, an acceleration from 2.8% in April.

Sequential inflation The sequential inflation readings in this report are quite good for domestic inflation, and even for the ex-energy reading, but not quite as good for the HICP which is the measure of inflation used by the European Central Bank. German HICP inflation is 2% over 12 months, drops to 0.9% over 6 months, and then the annualized rate rises to 2.2%, again, over 3 months. For the domestic measure of inflation, the annualized CPI rates are 2% over 12 months, 1.5% over 6 months and 1% over 3 months - a clear decelerating pattern. That decelerating pattern is echoed for the domestic CPI excluding energy which is at 2.5% over 12 months, 1.7%. over 6 months and 1.3% over 3 months.

Inflation Diffusion -monthly Inflation diffusion, which calculates the breadth of inflation for the domestic CPI, shows diffusion of 27.3% for June, 54.5% for May, and 18.2% for April. The June and April readings clearly point toward more decelerating than accelerating inflation as they are below the neutral 50% mark. The May report suggests just slightly more acceleration than deceleration at 54.5%.

Sequential Diffusion Sequentially, diffusion over 12 months, 6 months and 3 months gives us readings below 50% on each horizon which is good because that points to inflation decelerating rather than accelerating. However, the diffusion readings are consistently rising from 18.2% over 12 months, to 27.3% over 6 months, to 45.5% over 3 months – and moving more toward diffusion neutrality.

Weak oil has been a tailwind for lower inflation Inflation progress has been helped along by weak oil prices in June. Brent oil prices measured in euros rose by 6.7%; they had fallen by 4.1% in May and by 10.7% in April. These are month-to-month calculations. Sequentially, Brent oil prices fell by 20.7% over 12 months, they fell at a 23.4% annual rate over 6 months, and they're falling at a 30% annual rate over 3 months. All of these metrics should have helped the inflation numbers to look more contained. When inflation falls over a relatively long period of time, it also has a chance to permeate non-energy measures and cause even non-energy inflation to edge a little bit lower. For now, weakness in oil prices has been a tailwind for German inflation progress.
by:Robert Brusca
|in:Economy in Brief
Japan| Jul 08 2025
Japan’s Economy Watchers Reading Is Increasingly Narrow Range
The current and future economy watchers indexes advanced in June. In the current index, only services, housing, and employment readings weakened. In the future index, the reading for corporations weakened based on weakness for nonmanufacturing corporations. However, the improvement signaled is still quite downbeat since it only indicates that the ongoing deterioration is slower. The diffusion readings continue to be below 50, indicating pullbacks across all categories are still in train and are only letting up slightly.

While the improvements in the month-to-month readings were widespread, they were mostly small and no reading in either the current or the future survey has a diffusion value above 50%. That means that all these economy watcher readings are actually showing deterioration although on the month the rate of deterioration slowed across most category readings. In fact, there are no month-to-month readings at or above 50 in either the current or future survey in the last three months. To get a category reading of 50 or higher, we must go back to February when the reading for future employment was 50. We go back to August 2024 to find a majority of future sector reading at 50 or higher and to March 2024 to get a majority of current readings above 50.

The far-right hand column assesses the level of the June diffusion readings vs. past readings back to 2002. On that 23-year timeline, all the current and future readings have percentile standings below the 50% mark leaving all of them below their respective median readings for the period.

In the current survey, retailing and nonmanufacturers with diffusion percentile standings in their respective 41st percentiles have the strongest queue readings. The weakest reading in the current survey are the 21st percentile standings for housing and for employment.

For the future survey percentile readings, the strongest is a 45.5 percentile standing for eating and drinking places. The weakest future reading is the 24.5 percentile reading for employment.

Seeing such weakness in the current and future indexes in employment a reading that is a lynchpin for all sectors is clearly not reassuring.

At the bottom of the table, there are collected results for monthly data on month-to-month changes on the breadth of improvement. We see monthly that after a poor performance in April with most reporting categories worsening, May and June show most of them improving month-to-month on the order of 70% to 100%. Similar metrics for three-month and six-month changes perform much worse. These calculations are executed on changes in averages the twelve-month and average six-month and average 3-month data. On those comparisons, we see average diffusion is up broadly over 12 months compared to 12-months earlier. But the averages over six months and over three months are showing declines across all categories.

While the monthly data are showing some month-to-month improvement, the broader data show that the pace of improvement linked to broad averages is still not in place. And it is still a nefarious since of ‘improvement’ for the overall readings in which the diffusion data are only signaling that the categories are getting worse at a slower pace. Japan continues to struggle with weakness as the Bank of Japan wrestles with inflation and the United States and Japan spar over tariffs.
by:Robert Brusca
|in:Economy in Brief
Germany| Jul 07 2025
German IP Is Making Progress Across Most Sectors
German industrial production rose by a sharp 1.2% in May but only after a 1.6% plunge in April which followed a 2.3% surge in March. This has been an unusually turbulent period for industrial production. However, on balance, German IP shows acceleration (from 12-months to 6-months to 3-months) for headline IP, for consumer goods output, for capital goods output, as well as for manufacturing overall and for real manufacturing orders.

Data trends This collected pattern of accelerating trends is exceptionally good news and tends to push the volatility in output into the background. Typically, volatility tends to reduce the meaning of any trend since depending on where you are in a volatility, up-vs-down pattern, the trend will be not just exaggerated but even switched in direction. However, with not just growth but acceleration in play and with accelerating trends in play for so many categories- including real orders- the uptrend appears to be solidly established even in the face of volatility. And the chart seems to confirm that (drawn on year-over-year sector trends).

Knowledge beyond data In addition, we know that there are other conditions stirring in Europe that give us cause to think that output solidifying is a real event not just the luck of the draw on one month’s volatility. The shift is to get NATO countries to pay for more of their own defense and to pay more period. At the recent NATO meeting, member countries pledged to spend 5% of GDP on defense that should help to light a fire of demand across Europe. At the same time, the good news is that inflation headlines in the EMU and across major member countries are mostly on target while core inflation remains stubborn at an elevated pace near 2.5%, mostly across the EMU.

Quarter-to-date (QTD) The volatility leaves German IP growing at less than a 1% annual rate in Q2 over the Q1 average (quarter-to-date, or QTD)– a far less portent reading than the three-month rate of 7.7% (saar). But manufacturing, unimpeded by the weakness in construction, shows a QTD annual rate rise of 2.9%. Real manufacturing orders are advancing at a 16.4% annual rate in the quarter while real sales are declining.

Surveys show improvements over three months compared to six-months, but all of them also show some slippage over six months compared to 12-months. Yet, all of the three-month averages are above the 12-month averages. Survey data generally show momentum is turning higher, but not markedly.

Queue standings – longer term comparisons The queue standing data compare current growth rates (Y/Y) or (in the case of surveys) levels to past performance. Total IP, consumer goods, capital goods, manufacturing output, and real orders all have May readings above their historic median growth rates/or levels (rankings over 50%). But construction and intermediate goods sectors lag badly. Real sales are weak, and the surveys all show weak signal compared to all levels since January 2000. This tells us that the momentum in German industry (12-month growth) is solid and strong, but that the level of activity is weak – and quite weak- compared to past performance. This is also clear from the far-right column that measures current output relative to output in January 2020, just before Covid. These are aggregate changes. Germany’s output is still 1.7% lower in May 2025 than it was in January 2020 – nearly five- and one-half years down the road. This has been a very weak period for Germany. Only capital goods output among sectors is higher, rising by 4.9% over a period of five-plus years and making most of that in the last 12 months. The surveys show conditions have weakened on balance over this period as well.

Some other Europe Portugal and Norway give us a look at two other European economies. Both show growth in May as well as QTD. Norway is supercharged with the strong oil market in play as a tailwind. Its queue standing for growth has a 99-percentile reading. Both Portugal and Norway are stronger relative to January 2020; Portugal by 11.8% and Norway by 8.3%.
by:Robert Brusca
|in:Economy in Brief
Global| Jul 02 2025
Unemployment Rates Remain Low, Stable
The EU unemployment rate fell to within a tick of its all-time low in April at 5.9% and stayed there in May. In the European Monetary Union (EMU), the unemployment rate in April fell from 6.4% in March to 6.2% in April, its all-time low; then in May it ticked up to 6.3%. This can hardly be construed as a weakening of the European labor market.

At the same time, the EMU HICP has registered 2% growth year-over-year in June. In May it was at 1.9% with the core up at a 2.4% rise year-over-year. In June, Italian and Spanish core readings are 2.1% and 2.2%, respectively. In Germany, ex-energy inflation is at 2.5%. The core for the EMU is not yet available but clearly inflation, broadly considered, is very close to touching all the bases the ECB wants it to touch. And at the same time, Europe’s rate of unemployment is at or near all-time lows at least since the EMU was formed. That looks almost like policy nirvana.

The Monetary Union is experiencing low inflation rates even for those countries (largely Mediterranean countries) that had stubbornly high inflation rates in the past. Interestingly, those formerly high-inflation countries have substantially reduced their rates of unemployment. In the U.S., it was the long low, extra-low, inflation span after the Great recession that brought the inflation rate down slowly but eventually to 50–60-year lows. The U.S. rate got to 3.5% under Trump and briefly to 3.4% under Biden. Now with similar inflation progress -and for the EMU, there is a long train of progress not looking just since Covid but looking at the collective progress since the EMU was formed.

Among the 12 EMU members listed in the table, only three Luxembourg, Finland, and Austria have unemployment rates above their median rate compared to data since 1994. Spain’s unemployment rate is still in double digits at 10.8% but is much lower than it used to be. The Greek unemployment rate is at 7.9%; Portugal’s is at 6.3%. Spain’s unemployment rate is in the 15th percentile of its ordered queue of rates; the Greek rate has been lower only 3% of the time; in Portugal, the current rate has been lower less than 20% of the time. Low inflation and low unemployment go hand in hand. But when they diverge, the solution is not to coddle unemployment. It is to backdown inflation to allow the economy to move forward thereafter and prosper with lower inflation and lower unemployment in the future. I don’t think this lesson has been broadly enough learned, but looking at Europe and the U.S. the lesson simply presents itself with exceptional clarity.
by:Robert Brusca
|in:Economy in Brief
Global| Jul 01 2025
Global Manufacturing PMIs Mixed Story in June
The global manufacturing PMIs from S&P are largely mixed in June with 9 of the 18 surveyed economies showing manufacturing improvement and 9 showing deterioration. However, there's relatively more improvement shown among the large economies with the euro area, Germany, the United States, the United Kingdom, and Japan also showing improvement in the manufacturing sector in June.

Median manufacturing readings moved down slightly month to month in June; the sequential readings from 12-months to six-months to three-months still show slight slippages in train.

Diffusion readings measure a breadth of improvement from period to period. These readings show a 61.1% breadth over 12 months compared to a year ago; over six months compared to 12-months the breadth slips sharply to about 27%; over three months compared to six-months breadth improves to about 39%; however, that's still below 50% which is the neutral reading. Clearly on balance more are slipping that are improving.

There are some sequential trends clearly showing that conditions are still touch and go and still not improving although the counterpoint to that is that year-over-year, the six-month to 12-month, and the three-month to six-month changes show consistent improvement for the United States, France, Germany, the euro area and that on that comparison India is also doing better at each venue.

The pooled data are not particularly impressive or encouraging. However, it's clear that there are some centers of strength and of firmness and enough to be somewhat encouraging because the large economies do tend to lead the way and right now, they are the stronger group of economies.

Readings in terms of strength show that, on the whole period, back to January 2021, the euro area, Germany, France, and the U.S. all have standings in their June readings that are above their medians; for that period Japan also has a standing above its median. India has a standing in its 90th percentile, an extremely strong reading. The large economies, and at least one of the large developing economies, are having some success.

The percentile standings, however, drive home a message that the median ranking among reporting countries for this period is in its 32nd percentile, close to the one third mark and nowhere near the median for its historic queue of data - and that's not encouraging.

Polled together on unweighted data, the U.S., the U.K., the European Monetary Union, Canada, and Japan have a queue standing on the period in only its 45th percentile. The BRIC countries are only in their 40th percentile. The average among Asian countries is only in its 37th percentile.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 30 2025
Globally Money Growth Stabilizes Except in Japan
Globally money growth has stabilized more in the month of May.

In the European Monetary Union (EMU) over three months the annualized money growth rate ticked up to 2.9%, compared with 2.5% growth rate over six months and a 3.6% growth rate over 12 months; over two and three years the growth rate for money in EMU has been 2% for two years and 1.4% for three years. Compared to that, we have money growth sustaining itself at a stronger level.

In the United States, money growth continues to accelerate but slightly; the three-month growth rate for money is 6.2%; at an annual rate over six months it's 4.9%; over 12 months its pace is 4.5%. Money growth has steadily accelerated compared to a 0.4% growth over 3 years and a 2.7% pace over 2 years. The U.S. is the one exception where money growth rates are looking hot and where there has been steady acceleration in these growth rate; these calculations are in terms of M2.

The United Kingdom shows more variability as 12-month growth in U.K. for the money aggregate M4 is 3.5%. That moves up to 4.1% over 6 months and is back down to 1.7% annualized over 3 months. So, the 3-month growth rate in the U.K. is looking more like the 1.8% growth rate over 2 years, but even that stepped up from 1.1% over 3 years. In the case of the U.K., money growth rates have picked up and do seem to have steadied and they are off their top growth pace. However, at 1.7% the nominal growth rate of money over three months is on the light side

Japan, of course, is the central bank that is still engaged in raising rates and still has an acknowledged inflation problem. In Japan, the 3-month growth rate for M2 plus CDs is -1.3% annualized, weaker than 0.1% over 6 months which is weaker than 0.6% over 12 months; the Japanese money growth rates also decelerate from three-years to two-years and continue to decelerate on down to three-months. The Bank of Japan is still plotting its strategy for an inflation rate that appears to be both stubborn and slightly excessive. However, it's a welcome set of problems compared to the deflation that Japan dealt with the decade earlier.

Real money balances Real money balances tend to show some step up in pace. In the case of the European Monetary Union, there's a steady acceleration of money growth from -2% at an annual rate over three years to +2.3% over 3 months and more or less steady pickups from period to period in between.

In the U.S., real money growth rates show a persistence acceleration from -2.8% at an annual rate over three years to the 5.2% annual rate over three months. Real money supply growth in the U.S. is cooking and strong, particularly over three months. However, over six months the growth rate is only 2.2% so the heat in terms of U.S. money supply growth is a relatively recent phenomenon.

In the U.K., real M4 growth continues to show contraction and M4 growth contracts over all horizons; over three years, two years 12 months, six months and three-months. However, the three-month contraction is at a -1.6% rate, deeper contraction than the 12-month rate (-0.4%) and pretty close to what it's done over two years on balance (-1.5%) although that's a step up in the pace of contraction compared to 12-months to six-months. U.K. growth has been running on the weak side in addition to its weak real and nominal money supply growth.

Japan shows contraction and money supply overall horizons and the contraction gets progressively larger over more recent periods; money growth is at a -4.1% annual rate over three months and that compares to -2.8% over 12 months, logging a declining rate of -1.4% at an annual rate over three years. Japan’s weak real money growth is a policy decision.

The background for real and nominal money growth is that oil prices are continuing to fall. They're falling in nominal terms and in real terms with year-over-year oil prices falling at about a 23% annual rate and in real terms the oil price is falling at about a 25% annual rate. The weakness in oil is helping central banks catch up on their inflation mandates at least four headline inflation.

EU credit growth is lax And the European Monetary Union credit growth continues to expand but it is slowing. Private credit grows 2.4% at an annual rate over 12 months, but that slips to 1.5% annualized over three months and compares to the kind of growth that Europe had been seeing over two and three years where the growth rates averaged 1.4% and 1.7%. Real credit growth in the monetary union shows that there has been a pickup in the growth rates from 12 months to six months to three months; all show expansion although there's not steady acceleration there is steady positive growth. Those are good developments for the outlook for growth.
by:Robert Brusca
|in:Economy in Brief