Robert Brusca

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080609d.jpg" align="left" border="0" height="265" width="353"></p>
<p>German industrial output in April fell by 0.8% for the second
straight month, held back by dropping construction sector output.
However, the sector indices for consumer goods and intermediate goods
tumbled in April as well. Capital goods output is now down in two of
the last three months and is lower by 1.9% at an annual rate compared
to Q1. Manufacturing IP is flat or lower in the three recent months and
is falling at a 1.3% annual rate in Q2. Manufacturing orders are off
even more sharply, at a 9.3% annual rate in the new quarter.<br>
<br>
</p>
<p>The signal from orders is clear. It has not yet hit IP with
full force. For now German IP is off in the quarter and more slowing is
coming in the pipeline.<br>
</p>
</span>
<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"><b>Total German IP</b> </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td><b>Apr-08</b></td>
<td><b>Mar-08</b></td>
<td><b>Feb-08</b></td>
<td><b>3-mo</b></td>
<td><b>6-mo</b></td>
<td><b>12-mo</b></td>
<td><b>Quarter-to-Date</b></td>
</tr>
<tr class="odd">
<td class="firstcol">IP total</td>
<td>-0.8%</td>
<td>-0.8%</td>
<td>0.2%</td>
<td>-5.8%</td>
<td>2.4%</td>
<td>4.8%</td>
<td>-3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>-2.5%</td>
<td>0.8%</td>
<td>-0.8%</td>
<td>-9.5%</td>
<td>-2.7%</td>
<td>-0.6%</td>
<td>-4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>1.7%</td>
<td>-2.2%</td>
<td>-0.7%</td>
<td>-4.8%</td>
<td>5.2%</td>
<td>8.9%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediary Goods</td>
<td>-2.2%</td>
<td>0.9%</td>
<td>1.2%</td>
<td>-0.3%</td>
<td>4.2%</td>
<td>5.7%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol" colspan="8">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-2.9%</td>
<td>-13.1%</td>
<td>3.1%</td>
<td>-42.5%</td>
<td>-2.2%</td>
<td>-2.3%</td>
<td>-38.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG IP</td>
<td>-0.7%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-4.1%</td>
<td>3.3%</td>
<td>5.7%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Orders</td>
<td>-1.8%</td>
<td>-0.5%</td>
<td>-0.6%</td>
<td>-11.1%</td>
<td>-5.1%</td>
<td>4.0%</td>
<td>-9.3%</td>
</tr>
</tbody>
</table>
</body></html>

German industrial output in April fell by 0.8% for the second straight month, held back by dropping construction sector output. However, the sector indices for consumer goods and intermediate goods tumbled in April as well. Capital [...]

German Industrial Output Trends Head Lower

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

A premier time series data platform for the global strategy, research, and quant communities. 

New York

London

Singapore

Tokyo

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Tom Moeller

250728A8.jpg

250728B8.jpg

Texas manufacturing sector activity improved in July, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The General Business Activity index rose to 0.9% this month from -12.7% in June, but remained below a high of +14.1 in January. A higher 22.1% of respondents reported improved business activity in July. The Future Business Activity index strengthened to 19.0 this month to its highest level since January. The data were collected from July 15 to 23 from 81 manufacturing firms.

The production index strengthened to 21.3 from 1.3 in June and stood at the highest level since December 2021. A higher 35.2% of respondents reported increasing production. The employment index rose in July to 8.4, its best reading since September 2023 as 17.4% of respondents reported higher employment for the month. The hours worked measure surged to 7.7 from -8.4. The capital expenditures index remained positive at 6.8 after surging to 10.9 in June. The shipments reading increased to 2.7 after falling to -7.3 in June. The growth rate of new orders index rose to -9.1 from -17.2; it has not been positive since January.

Inflation indicators weakened this month. The index for prices received for finished goods declined to 11.1 after rising to 26.1 in June. It was the lowest level since March. A lessened 15.8% of respondents reported raising prices this month while a higher 4.7% reported lowering prices. The index of prices paid for raw materials fell to 41.7 from 43.0, but remained up from a low of 1.0 in June 2023. The wages & benefits index eased to 13.2 this month after falling to 13.4 in June, and has been trending lower since a high of 50.6 in May 2022.

The rise in the Future Manufacturing Activity Index reflected a strengthening in expected new orders growth to 18.8 from 15.3 and expected production to 30.3 from 22.6. The future employment reading strengthened to 27.3, its highest level since January. The future wages & benefits reading rose to 37.2 after doubling to 32.1 in June. The future capital spending reading, however, eased to 15.5 and remained below its January high of 27.3.

Each index is calculated by subtracting the percentage reporting a decrease in activity from the percentage reporting an increase. When all firms report rising activity, an index will register 100. An index will register -100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase equals the number reporting a decrease. Data for the Texas Manufacturing Outlook, conducted by the Federal Reserve Bank of Dallas, can be found in Haver's **SURVEYS** database.

250728C8.jpg

250728D8.jpg

- Survey turns positive for first time in six months.
- Production, employment & hours-worked readings improve.
- Prices and wages & benefits indicators weaken.

Texas Manufacturing Activity Index Turns Positive in July; Expectations Strengthen

Tian Yong Woon

This week, we examine a series of major US trade and tariff developments since early July. The US has expanded its network of bilateral trade deals, including deals with Indonesia and the Philippines, both securing tariff rates of 19%. Meanwhile, former President Trump has seemingly raised the general tariff floor from 10% to 15%, potentially affecting countries like Australia, New Zealand, and Singapore (see chart 1). India, once expected to be among the first to reach a deal, has yet to finalize an agreement ahead of the August 1 deadline. Attention remains on China’s suspected use of transshipments through third countries to circumvent tariffs. One possible, though inconclusive, indicator is the decline in China’s direct exports to the US alongside stable overall export levels—suggesting either the use of transshipment routes or a broader redirection of exports to other markets (see chart 2).

Japan also recently struck a significant deal with the US, reducing its reciprocal tariff from 24% to 15%. This announcement boosted Japanese equities and the yen (see chart 3). However, Japan’s auto exports to the US continue to decline, with firms absorbing tariff-related costs to maintain competitiveness (see chart 4). Despite political uncertainty following the ruling LDP’s losses in recent upper house elections, Japanese markets have remained resilient (see chart 5). As the Bank of Japan prepares to announce its next rate decision, real wages have posted their sharpest decline in two years, while household spending—driven by car purchases—has surged (see chart 6).

**Latest US tariff developments**
Several significant US trade developments have occurred since early July. Notably, the number of bilateral trade deals secured by the US has increased. For instance, Indonesia reached an agreement that reduced tariffs from 32% to 19%, while the Philippines avoided a previously threatened 20% rate, settling instead at 19%. Meanwhile, former President Trump has reportedly raised the tariff floor from 10% to 15%. This suggests that countries previously facing the 10% rate—such as Australia, New Zealand, and Singapore (which runs a trade surplus with the US)—will now be subject to higher duties, as illustrated in chart 1. In contrast, India, once expected to be among the first to reach a deal, has yet to produce a substantive agreement as the August 1 deadline approaches.

250728T1.jpg

Among the ongoing discussions, a key talking point remains the US's continued concern over China’s use of transshipments through third countries to circumvent US tariffs. One Asian economy that has come under scrutiny is Vietnam. While Vietnam has secured a trade deal with the US—lowering its general tariff rate to 20%—the agreement includes a specific provision: “transshipments” of goods face a 40% tariff. As shown in chart 2, there are signs, though not confirmations, that such practices may be occurring. For example, while China’s direct exports to the US have been declining, its overall export growth has remained steady. This could suggest, among other causes, the use of transshipment routes or simply a rerouting of Chinese exports to other markets to sustain growth.

250728T2.jpg

**The US-Japan trade deal**
Japanese equities and the yen have surged following the announcement of the US–Japan trade deal (chart 3), which lowered Japan’s reciprocal tariff rate from an original 24% to 15%. In exchange, Japan has reportedly agreed to, among other terms, a $550 billion package of investments in, and loans to, the US. The country’s auto industry, which had previously faced a 27.5% tariff—due to the US’s 25% sectoral tariff and an existing 2.5% duty—also saw its rate reduced to 15%, likely to the great relief of Japanese carmakers. That said, while the new 15% rate marks a substantial drop from the earlier 24%, Japan remains worse off compared to the pre–Liberation Day baseline. As for the yen, it had already begun to strengthen prior to the deal’s announcement. Despite the ruling Liberal Democratic Party (LDP) suffering a notable loss in the recent upper house elections, the outcome appeared to fall within investor expectations, possibly triggering a round of precautionary yen selling beforehand. More on Japan’s elections will be covered in a later section.

250728T3.jpg

**Japan’s auto industry**
Meanwhile, sectoral tariffs on key Japanese industries—particularly autos—continue to weigh on the country’s economic outlook. Many of Japan’s major car exporters have reportedly avoided raising prices significantly, choosing instead to absorb most of the cost from US auto tariffs, likely in an effort to maintain market share. However, gradual price increases may follow if automakers can no longer sustain these margins. As shown in chart 5, the value of Japan’s motor vehicle exports to the US has already declined sharply. This is likely due to manufacturers absorbing the tariff burden, a trend also reflected in Japan’s export price data. As such, the impact on Japanese automakers’ bottom lines is already becoming evident. That said, the production capacity of Japanese carmakers in the US—which many firms are actively working to expand—offers some relief from declining exports. Additionally, the recently announced reduction in US auto tariffs on Japan will likely alleviate, though not eliminate, the pressure on Japan’s auto industry.

250728T4.jpg

**Japan’s upper house elections**
Japanese assets have rallied despite heightened policy uncertainty (chart 5), as the ruling Liberal Democratic Party (LDP) suffered a major setback in recent upper house elections, losing its majority along with coalition partner Komeito. This follows an earlier defeat in the October 2024 snap elections, when the LDP also lost its majority in the lower house. As a result, the coalition must now rely on support from opposition parties to pass legislation in both chambers—granting opposition groups, which hold diverse and often conflicting policy views, greater influence over future policymaking. The election results come amid mounting domestic challenges, particularly inflation, with rising rice prices drawing widespread concern. Speculation has intensified over whether Prime Minister Ishiba may resign, though he has consistently denied any such plans.

250728T5.jpg

**The Bank of Japan**
Lastly, we turn to the Bank of Japan (BoJ), which is set to announce its interest rate decision this week. Markets broadly expect the BoJ to keep rates unchanged for now, with any further hikes likely deferred. This comes amid heightened political uncertainty following the ruling LDP’s significant defeat in the recent upper house elections, casting fresh doubt on Prime Minister Ishiba’s leadership. The BoJ’s path toward further policy normalisation is also being complicated by weakening wage growth. Earlier momentum has faded, with nominal wages rising just 1.4% year-on-year in May, as shown in chart 6. Combined with still-elevated inflation, real wages posted their sharpest decline in two years during the month. Nonetheless, household spending saw a notable surge in May. However, this was largely driven by car purchases, which benefited from low base effects due to safety-related scandals a year earlier.

250728T6.jpg

Asia

Economic Letter from Asia: Dealing with it

250725V4.jpg

250725W4.jpg

Durable goods orders fell 9.3% (+10.9% y/y) in during June after rising 16.5% in May, revised from 16.4%. Orders in April fell 6.6%. A 10.0% decline had been expected in the Action Economics Forecast Survey.

The decline reflected a near-halving of orders for commercial aircraft which pulled total transportation equipment orders down 22.4% (+30.5% y/y). Orders excluding transportation rose 0.2% last month (2.2% y/y) after a 0.6% rise in May. Orders for computers & electronic products rose 0.6% (4.8% y/y) after rising 1.7% in May. Orders for machinery gained 0.4% (3.2% y/y) for the second straight month while electrical equipment, appliances & components orders inched 0.1% higher (4.7% y/y) following a 0.8% May rise. Primary metals orders gained 0.6% (-0.5% y/y) in June following a 0.7% gain and fabricated metals orders rose 0.2% (3.2% y/y) after surging 1.1% in May. Defense aircraft orders rose 9.1% (7.4% y/y) after a 10.2% May decline.

Total shipments increased 0.4% (1.8% y/y) in June following a 0.2% May rise. Shipments of durable goods industries rose 0.5% (2.9% y/y) in June after improving 0.2% in May. Transportation equipment shipments rose 0.8% (4.2% y/y) and machinery shipments gained 1.0% (1.5% y/y). Computer & electronic product shipments edged 0.1% higher (6.3% y/y) and electrical equipment & appliance & components shipments rose 0.7% (4.9% y/y). Primary metals shipments gained 0.6% (2.5% y/y) while fabricated metals shipments rose 0.2% (1.9% y/y). Shipments of nondurable goods 	rose 0.4% (0.6% y/y) following a 0.1% gain.

Unfilled orders for all manufactured products jumped 1.0% (7.1% y/y) in June after a 3.4% May rise. Excluding transportation, unfilled orders rose 0.1% (0.8% y/y), the same as in May. Backlogs of durable goods rose 1.0% (7.1% y/y) in June, reflecting a 1.6% jump (11.4% y/y) in transportation equipment, led by a 2.1% rise (14.7% y/y) in nondefense aircraft. Machinery backlogs eased 0.1% (-1.8% y/y) in June. Electrical equipment, appliances & component backlogs rose 0.1% (1.0% y/y). Order backlogs of computers & electronic products eased 0.1% (-0.2% y/y), off slightly for the third straight month.

Inventories of all manufactured products rose 0.2% (1.1% y/y) in June following a 0.1% gain in May and a 0.1% April decline. Durable goods inventories rose 0.2% (1.5% y/y) for the second straight month. Inventories of machinery gained 0.4% (2.3% y/y) while computer & electronic product inventories rose 0.1% (0.3% y/y) for the second straight month. Transportation inventories eased 0.1% (+1.6% y/y).

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

250725X4.jpg

250725Y4.jpg

- Orders excluding transportation weaken.
- Shipments strengthen.
- Unfilled orders surge, led by aircraft; inventories increase slightly.

U.S. Advance Durable Goods Orders Decline in June as Aircraft Bookings Plunge

250725E.jpg

Hypnotists are just trying to get you to focus on something and concentrate on it so that you can relax and they can put you into a hypnotic trance. Right now, you want to make sure that does not happen as you watch what is going on with money supply. It is not ‘entrancing’ and ought to be followed. The chart shows you that trends - and often excesses in ‘global money supply’ growth have begun in that money center country, the United States of America. And… well… here we go again? While it's very early in the game, it looks like, after a period of monetary weakness and re-escalation, U.S. money growth is now beginning to step up in the U.S. Meanwhile, in Europe and in the United Kingdom, money growth, especially real money growth, is beginning to tail off. All this is at a time when Japan's money growth, of course, has been marching to the step of a different drummer showing regular, consistent, nominal weakness and actual declines in the real money stock to try to tame its incipient inflation.

**The Policy Zone**
We are no longer in the COVID era; or even in the post-COVID era. We are now in the post post-COVID era. And monetary policy is being made based on conditions rather than remedy perceived legacy problems in the economy from COVID. We need to make that transition in our analysis too, and ask ourselves, “What's really happening?” In the U.S., the popular dogma is to claim that central bank independence is being undercut and that Donald Trump's tariffs are going to raise the inflation rate and that the Fed is losing its battle with inflation and inflation is coming because of excessive fiscal policy and the imposition of tariffs. It's a story you can believe if you want to. There's certainly some evidence to support those points; whether they completely justify that point of view, it is still too early to say. However, clearly, money supply growth in the U.S. is ramping up. The U.S. 12-month growth rate is up to 4.5%, over six months the annualized rate hits 5.5%, and over three months the annualized rate hits 6.9%. It's hard to say that that's occurring because of Trump's tariffs. At the same time, the growth rate in real money balances - that's money supply deflated by the CPI - has boosted its growth rate from 1.8% over 12 months to a 2.9% annual rate over six months to a 4.4% annual rate over three months. Is the chase on for an inflation ‘uptick’ that will not be temporary?

**Follow the leader, or go your own way?**
It will take some time to tell if the other money center countries are going to follow the leader or not. So far it looks like ‘or not.’ Money supply growth in the European Monetary Union (EMU) is actually decelerating slightly from 2.8% over 12 months to a 1.7% pace over six months to a 1.3% pace over three months. Similarly, in the EMU the growth of real balances has slipped from 0.8% over 12 months to a 0.2% annual rate over six months to a -0.6% annual rate (contraction) over three months. So far, euro area money supply is not tagging along with the U.S. trend.

**Euro-credit trends**
Meanwhile, private credit growth in Europe has stabilized with the 12-month growth rate of 2.3% that moves up to 2.4% over six months and settles back to 2% over three months, a relatively stable performance that would seem to signal ongoing moderate growth. The growth rate of private credit, deflated for the effects of inflation, shows continued growth, and beyond that the trend is unclear. Over 12 months the growth rate is 0.3%, over six months that improves to 0.8%, and over three months it drops back to a 0.1% pace. I'm not good enough at splitting hair to be able to tell you what that trend is.

**U.K. money weakens**
In the U.K., nominal money supply growth seems to be slowing, but that isn't crystal clear, with the 3.5% annual rate over 12 months moving up to a 4.1% annual rate over six months been slipping back to 1.7% over three months. It may take a few months to be able to tell if the step down to 1.7% is real or just volatility averaging out the step up over six months. U.K. money growth does not appear to be excessive or rogue; when we look at real balances, 12-month growth is -0.4%, six-month growth is -0.1% and the three-month growth rate is -1.6%. On that profile, real money growth in the U.K. does not appear to be following the U.S. rule book either.

**Japan- dealing with its own complex issues**
We know that Japan has been off on its own for a while. Japan clearly has been fighting off a bout of inflation. But, since that development is relatively new, and the previous battle with deflation was relatively long-lived, if we think in terms of inflation averaging, Japan is still dealing with an extremely small problem. Despite the appearance of some real inflation (depending on the price index you look at to establish Japanese inflation trends), Japan's inflation overshoot in contexts is only making up for lost time.

Money growth in Japan is 0.9% over 12 months; however, it's only running at a 0.1% annualized over six months and over three months. The growth of real money balances in Japan is negative. Real balance growth rates are negative on balance over three years and two years; the 12-month growth rate for real money balances is -2.3%, over six months it is -2.2%, and over three months it is -2%. The degree of restriction has faded but faded only very marginally. The main point is that in Japan, real money balances are contracting and so there is a fight to reduce inflation going on behind the scenes and that's clearing up; you can see it in the money growth rates on the chart as well if not from the level or real interest rates. Japan is balancing complex needs.

250725.jpg

**Are tariffs a threat or benign?**
As we sharpen our pencils or fill in our spreadsheets with guesses at the independent variables, and try to predict the future, let's not obsess too much about the independence and credibility of central banks and put too much of the blame on developing tariff policy. I'm not prepared to argue the tariffs are unimportant. In the short run, they could create some difficult decisions for monetary policy agencies. And beyond tariffs, let’s remember that the collapse of Bretton Woods and the installation of fluctuations exchange rates also did usher in an age of higher inflation. Exchange rate changes, like tariffs, are not formally inflationary but they do change (like tariffs) relative prices. There is more discussion about inflation and exchange rates than about inflation and tariffs mostly because exchange rate fluctuations became more pronounced after 1971 while tariffs were mostly being cut in periodic multilateral rounds until recently. The absence of a literature on tariffs and inflation is an artifact of economic circumstance.

**The road ahead and the traffic around us**
Whatever the ‘threat’ of tariffs, the trends in money supply are more fundamental and certainly something you don't want to lose track of although many people do lose track of money supply these days. Central banks have certainly downgraded money supply. In the U.S., relevant money supply data are released much less frequently and the data we are provided with is much less thorough than it used to be. Central banks want to be known for their interest rate policy and inflation targeting. A strange desire after they have been so unsuccessful at hitting those targets over the past four years… But of course, there are policy tools to focus on: the official interest rate the central bank implements, the guidance it gives us about the future, the way that markets price themselves relative to the central bank rate which affects the way interest rates work their way into the economy… And then, of course, there is the issue of what inflation is, and what it will be, and what assumptions monetary policy makes when it evaluates itself to decide how it's going to be presented to the public by the central bank. All of this leaves a lot of room for discretion and slippage and what monetary policy really is. It puts the central bank in a position to - as always - occupy the bully pulpit and to steer the discussion in the direction they want which inevitably is the direction that justifies the kind of policy they've decided to run. Now is a good time to pull yourself out of that cycle to step back and to look objectively at what's happening with money supply and policy and to think about what happens next. Policy is not completely about politics after all. Tariffs are not the keystone to build an outlook for the future.

German Industrial Output Trends Head Lower

Summary

Robert Brusca

More Economy in Brief

Texas Manufacturing Activity Index Turns Positive in July; Expectations Strengthen

Economic Letter from Asia: Dealing with it

U.S. Advance Durable Goods Orders Decline in June as Aircraft Bookings Plunge

Global Money Supply Begins to Show Divergences; Watch the Green Line and Don’t Get Sleepy

Total German IP
Saar exept m/m	Apr-08	Mar-08	Feb-08	3-mo	6-mo	12-mo	Quarter-to-Date
IP total	-0.8%	-0.8%	0.2%	-5.8%	2.4%	4.8%	-3.1%
Consumer Goods	-2.5%	0.8%	-0.8%	-9.5%	-2.7%	-0.6%	-4.6%
Capital Goods	1.7%	-2.2%	-0.7%	-4.8%	5.2%	8.9%	-1.9%
Intermediary Goods	-2.2%	0.9%	1.2%	-0.3%	4.2%	5.7%	0.9%
Memo
Construction	-2.9%	-13.1%	3.1%	-42.5%	-2.2%	-2.3%	-38.0%
MFG IP	-0.7%	-0.3%	0.0%	-4.1%	3.3%	5.7%	-1.3%
MFG Orders	-1.8%	-0.5%	-0.6%	-11.1%	-5.1%	4.0%	-9.3%