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

United Kingdom| Jun 12 2026
U.K. IP Makes Some Recovery
Industrial production in the United Kingdom took another step up in April, rising by 0.4% after gaining 1.2% month-to-month in March. Consumer durable goods production fell by 0.7% and capital goods production fell by 0.6% in April, but nondurable goods production increased by 0.8% and intermediate goods output increased by 1.1%. Given the weighting for these sectors, all that amounted to an overall increase of 0.4% in manufacturing output.

In March, there had been month-to-month increases in each of these sectors. Sector by sector gains were quite substantial in March for all the sectors, except for capital goods output up only 0.1%; capital goods output has been weak over the last several months and has come through a period of some significant volatility.

Sequentially, U.K. manufacturing output has registered gains over 12 months, six months and three months. The 12-month gain is only 1%, but over six months output expands at a 6.4% annual rate, and while it stepped back to a 5.7% rate of expansion over three months, there is a hint of acceleration.

Sequential trends in manufacturing output Looking at sectors, there are two that have accelerated over this time span; the output of consumer nondurable goods and the output of intermediate goods. Nondurable goods output rose by 0.4% over 12 months, then stepped up to an 8.1% pace over six months and rose further to an 11.1% pace over three months. For intermediate goods, output declined by 0.9% over 12 months, then switched to post a gain at a 3.2% pace over six months and then again at a 9.7% annual rate over three months. Durable goods output has a hint of acceleration but doesn't quite go over the hurdle as its 8.7% year-over-year growth rate fades to 5.7% over six months but then jumps back to 10.1% over three months. Capital goods output is more indeterminate, with a 3.9% growth rate over 12 months, a very strong 9.5% growth rate over six months, and then a decline of 1.9% at an annual rate over three months.

On a quarter-to-date (QTD) basis, all the sectors are showing increases except for capital goods where output is falling at a 3.1% annual rate. The QTD calculation as of April is only one month into the new quarter; the quarter’s overall output is growing at a 7% annual rate. Manufacturing sectors have recovered fairly well from the difficulties during COVID. The exception is intermediate goods where output as of April 2026 is still 17% below what it was back in January 2020. However, if we evaluate the sectors on their current year-over-year growth rates, we'll find consumer durables has a strong standing at their 86th percentile and capital goods, despite its recent weakness, has a 71.5 percentile standing among its growth rates back to January 2012. However, manufacturing growth overall at 1.0% has only a 43.6 percentile standing. Intermediate goods (that registered a decline over 12 months) have a 40.7 percentile standing. Consumer nondurables, despite their current acceleration string, have only a 25.6 percentile standing, but that's based on the year-over-year growth rate of only 0.4%.

U.K. industries The industry level growth rates and standings for the United Kingdom show more diversity, with current growth rates above their medians for textile & leather as well as for utilities. Food, motor vehicles, and mining generate growth rates below their medians on data back to 2012. However, comparing aggregate levels of output to January 2020 shows three sectors: textile & leather, mining & quarrying, and utilities that report a level of output below where it was over six years ago. The shortfalls in mining & quarrying and in utilities are stunningly weak.

Overall, the manufacturing sector is doing quite well by comparison with past trends. But parts of the U.K. economy are clearly going through some massive changes.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 11 2026
EMU Inflation and An ECB Rate Hike
Channeling ‘The Who,’ the ECB implemented its 'We Won’t Get Fooled Again' rate hike. During COVID, inflation spiked around the world as central bankers were late with rate hikes. Arguably, too many of them followed the lead of the U.S. Federal Reserve. The ECB leaned against that by hiking its key deposit rate by 25bp today.

Both the chart and the table show how inflation has recently soared sharply in the countries of the European Monetary Union. However, the price gains are concentrated in the headlines and driven by oil prices. Still, oil price gains this large and persistent—and potentially long-lasting—will permeate the pricing of most goods since there will be knock-on effects through transportation costs. The ECB has therefore taken a step to keep in line with the increase in energy prices.

If there are further impacts from energy prices, the ECB has the door open to move again. But if price pressures wane, the ECB will be under no pressure to act again.

For now, we can see that headline inflation across the European economic area is generally accelerating strongly and somewhat uniformly. The three-month annualized HICP rose at a 6.3% annual rate. With three-month inflation among these 11 long-lived EMU members, the highest three-month pace is 13.5% in Luxembourg. Germany has the lowest inflation over three months, at a 4% pace.

The 12-month inflation pace is better contained, of course, with a top gain of 4.5% in Greece compared to the slowest pace at 2.5% in France and Germany. Over three months and 12 months, headline inflation shows deceleration occurring in none of these countries on these two timelines. So, the ECB action is timely.

The median gain for the group over three months is 6.5%, close to the overall EMU weighted result. The 12-month median is at 3.2%, also close to the 12-month EMU pace.

By comparison, I calculate the median for the core at 2.2% over three months and 2.0% over 12 months—right on the ECB’s inflation objective. Core inflation is never the central bank’s target, but it does strip out the volatility. So, we can understand the ECB’s move as an effort to keep up with what might be a changed trend. And if it is not a changed trend, then the ECB can peel its rate hike back. But for now, it is going to stay close to the short-term impact on the inflation rate to be sure that it will control inflation developments in the future. This is a good way to not repeat past mistakes.
by:Robert Brusca
|in:Economy in Brief
Japan| Jun 10 2026
Japan’s PPI—The PPI Is Not the CPI
Once again, we are seeing Japan’s PPI creating a separation from the CPI. Both the CPI and PPI were trending lower before the attack on Iran. The CPI has better maintained its downtrend, but the PPI has been blasted higher. In 2021, there was also a huge spike in the PPI that the CPI did not follow immediately, although the CPI eventually responds, rising in a much more muted way.

These behaviors caution us from thinking that the CPI is going surge in step with the PPI but also warn us not to expect this gain to be ignored by the CPI. There will be a lagged response.

The PPI explosion is really strong, with the three-month annualized increase in the PPI and manufacturing prices both approaching 20%. Both measures are up at a much more muted 6% to 6.5% over 12 months, so the acceleration has been strong and sudden.

The table also shows lagged data that re-express the PPI trend to put it on the same timeline as Japan’s CPI and the U.S. and EMU PPIs. The PPI in the EMU has surged in line with the gains seen in Japan. However, in the U.S., the PPI has accelerated from a gain of 2.4% over 12 months to an annual rate rise of just 7.8% over three months.

But in Japan, the CPI and core CPI gauges have continued to temper their rises, using data through April and looking at sequential growth pressures on Japan’s CPI. It’s quite amazing!

Japan imports its oil and so would seem quite vulnerable to oil price spikes. However, because it is vulnerable, Japan takes steps to assure its supply and control its oil costs by arranging long-term contracts. That has helped to contain the impetus of surging global oil prices. Globally, oil (Brent, in dollars) is off sharply in May after turning slightly lower in April. Sequentially, Brent prices are up 44.4% over 12 months, up at a 110.2% annual rate over six months, and still up at 187.6% annualized rate over three months.

The table also shows some simple correlations with Brent prices. It demonstrates that the correlation between PPI prices of various sorts and Brent ranges from 0.4 to 0.5. But the correlation to Japan’s CPI price metrics is negative. So far, Japan’s CPI has been true to those results.

The Bank of Japan continues to struggle with its own view of the inflation risk. It is wary of damaging the economy but also concerned about allowing the door open to inflation because of its massive debt-to-GDP ratio. The BOJ is going to remain on inflation watch for some time.
by:Robert Brusca
|in:Economy in Brief
Germany| Jun 09 2026
German IP Rebounds in April
In the wake of a mixed in somewhat complex orders report from Germany yesterday, today Germany released its industrial production report. It shows output up by 0.4% in April after several months of declines. There was a strong gain of 1.9% month-to-month in consumer goods output and another strong gain of 1.4% in intermediate goods output. However, capital goods output continues to be weak, falling 1.5% month-to-month and continuing a string of five months in a row when manufacturing output for capital goods has declined.

Sequentially, overall output is showing strengthening growth rates from 12 months to six months to three months. The tendency to strengthen is driven by intermediate goods that have the exact same pattern in play. However, capital goods are showing increasing weakness from 12 months to six months to three months, culminating in a three-month annualized growth rate of -10.5%. The growth rate in consumer goods is weaker over three months and over 12 months but isn't intact progressively over all three periods. The chart is helpful here as it shows recent weakness and a more recent rebound that still leaves year-over-year growth rates declining.

Manufacturing output shows declines over each of these three periods without a clear trend tendency for speeding up or cooling down. Real manufacturing orders are close to accelerating over this same sequence of dates, while retail sector sales in manufacturing show increases in two of the periods, with a decline over three months at the end of the sequence and without a clear trend in place.

Other German industrial indicators are showing consistent weakness and deterioration from 12 months to six months to three months. That holds for the ZEW current index, the IFO manufacturing index, the IFO expectations index for manufacturing, and the European Commission’s index of industrial activity.

As for other early-reporting European economies, we have France, Spain, Portugal, and Norway to compare. France is showing acceleration from 12 months to three months. Spain comes close to showing consistent acceleration and finishes with a massive 60% annual rate of increase over three months. Portugal fails to show consistent signs but ends with strong output growth over three months as well. Norway also fails to show a consistent pattern and has a solid 2.3% growth rate over three months. The results from France and Spain are the most impressive among these—France because it shows consistent acceleration, and Spain because it is so very strong over the last three months.

In the quarter to date (QTD)—with one month of data in hand for the second quarter—all German sectors are showing expansion except for capital goods and manufacturing overall. The indicators for Germany show weakened conditions as we step into the new quarter, except for the EU Commission index. The four European countries we chronicled earlier, all show gains in the quarter to date, with France and Spain showing the most pickup.

The final column of the table ranks year-over-year growth rates on data back to 2006. On this basis, only the German intermediate goods sector has a year-over-year growth rate that ranks above its median for the period. Real manufacturing orders are close to their median with a 49.2 percentile standing, whereas the median occurs at a ranking of 50%. For the other industrial indicators, we compare them to historic index levels, and all four of the indicators are substantially below their historic marks since 2006. Meanwhile, for the four countries in Europe, three of the four are showing industrial output results that rank above their historic medians: Spain shows a 79th percentile ranking, France has a 77th percentile ranking, and Portugal has a 53rd percentile ranking. Only Norway has a subpar (below-median) 25th percentile ranking.
by:Robert Brusca
|in:Economy in Brief
Germany| Jun 08 2026
German Orders Drop, But Trend Offers Hope
German orders, now available for April, show both domestic and foreign orders are sketching a herky-jerky path higher. The volatility is such that we can't be sure the momentum will remain higher, but for the time being, the present orders are oscillating around an upward trend. There is a particularly striking downward movement in domestic orders, with three sizeable month-to-month drops in the last four months. The drop in foreign orders, at 4.2% month-to-month, is sharp, but that follows two months of very strong gains—although they follow one month of a substantial drop. German orders are simply sketching out a very dissonant path—very hard to discern a trend.

German orders show systemic sequential declines in domestic orders, an event that is offset by systematic sequential acceleration in foreign orders. The net result of total orders is an order slowdown over six months and four months that gives way to a sharp rise over three months.

Sector sales, expressed also in real trend, show consumer durable goods sales and intermediate good sales both engaged in alternating behavior.

Early in Q2, German orders show declines overall an in domestic orders that are only partly blunted by a sizeable rise in foreign orders. Sector sales show a real gain in manufacturing, pushed ahead by consumer durables and intermediate goods, against weakness in nondurables and in capital goods. The broad ranking of annual growth rates for sales and orders show abject ranking weakness for orders and all sales, with the sole exception of orders by foreigners—that series has a ranking above its median at the 60.7 percentile mark.

To compare German industry with other key European sectors, we use the EU industrial confidence gauges. This shows Spain as the only country among Spain, Italy, Germany, and France, with an industrial sector ranking above the 50th percentile mark (above its median reading). All of the manufacturing readings have negative values in April; however, only Germany shows an advance in progression from 12 months to six months to three months.

The industrial order report for April is weak, but there are undercurrents of uptrends embedded in the report. The month’s results and trends may be better than the current month’s topical readings suggest.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 05 2026
EMU GDP Contracts; Year-on-Year Growth Slows Sharply
GDP growth in the European Monetary Union backtracked in the first quarter, falling by 0.9% at an annual rate after rising by 0.7% at an annual rate in the fourth quarter of 2025. The year-over-year growth rate from the monetary union also slowed sharply to 0.3%. The small positive gain in Q1 2026 comes after gains of over 1% in year-over-year calculations since the third quarter of 2024. The queue ranking of the year-on-year GDP growth rate, on data back to 1997, places the Q1 GDP result in its 21st percentile—roughly a lower one-fifth ranking.

Among the 14 EMU member reporters of GDP data in the table, five countries experienced quarter-to-quarter declines in GDP in Q1 2026: France, Ireland, Luxembourg, Malta, and Austria. Ireland has some peculiar accounting issues because a number of multinational companies are headquartered there for tax reasons; this produced a decline in GDP at a 40% annual rate to dominate these results. And the sharp Irish decline in GDP has an outsized impact on the European Monetary Union GDP report itself. In contrast, among the individual reporting members, the median change in GDP in the first quarter was a 0.2% increase at an annual rate; both Portugal and the Netherlands experienced GDP increases of that magnitude.

In addition to that, the fourth quarter of 2025 showed decelerations in GDP for six of these reporting monetary union members; however, GDP declined in only two of these members in the fourth quarter.

Year-over-year data show GDP growth rates in the first quarter declining broadly in 11 of the 14 reporting members in this table. That compares to a slowdown reported by six member countries in the fourth quarter of 2025.

The four largest monetary union members experienced a slowdown in GDP, with growth at 1% in the first quarter compared to 1.3% in the fourth quarter; that 1% growth rate is the same as in the third quarter of 2025. The rest of the monetary union saw a sharp decline as GDP contracted at a 5.7% annual rate, with the Irish data playing a big role in that for the rest of the monetary union. For the four largest EMU economies, GDP advanced by 0.9% in Q1 2026 on a year-over-year basis. Year-over-year changes show relatively steady growth in the four largest monetary union economies, with growth rates of 1% or 0.9% in each of the last four quarters, while the rest of the monetary union shows much stronger growth rates over the last four quarters, but for that group, growth rates have been generally decelerating. That process culminates in a decline of 1.2% for year-over-year GDP growth in Q1 2026 for the rest of the EMU.

Over these last four quarters when the rest of the monetary union growth rates—apart from the four largest economies—showed steady slippage, Switzerland also showed a steady deceleration in GDP growth; so has the United Kingdom. Japan also has weakening growth over these last four quarters. However, the U.S. does not fall into that pattern, having maintained steady growth and then experienced a pickup in growth to 2.6% year-over-year in Q1 2026.

Few show above-median growth Among the countries in the table, very few have GDP growth rates year-over-year that are above their medians on performance back to 1997. However, countries with queue standing above their 50th percentile for growth rates reflect that phenomenon; those countries are the U.S., Spain, Portugal, Italy, Luxembourg, Greece, and Denmark. Belgium, Ireland, Cyprus, and Switzerland have growth rates ranked below the 20th percentile in the queue ranking system. The median and year-over-year growth rate in the monetary union has a 30.4 percentile ranking, similar to Japan with a 36.4 percentile ranking for its year-over-year GDP. Growth metrics are showing some struggle, and the combined weight of the ongoing Ukraine war and the new effect of the Middles East conflict take their tolls.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 04 2026
Retail Sales in Europe Continue to Struggle
Retail sales in the euro area declined in volume terms in April, falling 0.4% on the month after rising 0.8% in March and falling 0.5% in February. Food and beverage volume recovered to post an expansion after two monthly declines.

Sales trends slip: However, the headline for retail volume growth shows that there has been steady slippage, with growth over 12 months weaker than it was over the previous 12 months, growth over six months at a weaker pace than it was over 12 months, and growth over three months posting an outright decline compared to a gain over six months. The highlighted red background in the table shows this string of continuous slowing that marks decelerating retail spending in the euro area as of April. In the quarter to date, retail sales volumes are declining at a 0.2% annual rate—a very slight contraction but a net reduction in sales volume, nonetheless, to start the second quarter.

Contrarian strength in vehicle demand: Motor vehicle registrations pulled back in April after some strong gains in earlier months. Motor vehicle registrations are accelerating as the growth rate rises from 12 months to six months to three months; growth actually explodes over three months, rising at a 52.4% annualized rate. With this strength, naturally, motor vehicle registrations are logging strong growth at the beginning of this new quarter, rising at a 33.6% annual rate.

Despite the strength in motor vehicle registrations, registrations are still a lot lower in comparison to January 2020. They have averaged a decline of 1.2% per year over this period. Since January 2020, just before COVID struck, retail sales in the euro area have risen by 6.7%, implying an average annual growth rate of 1% per year. This has generally been a lethargic period for retail sales.

Sales trends by country Looking at the individual countries in the table, we chronicle developments for EMU members Germany and the Netherlands, EU member Denmark, and Northern European countries Norway and Sweden, plus former EU member the United Kingdom. We see that all of these countries have had a long period of weak growth going back to January 2020. Among these countries, only Denmark and the Netherlands have averaged retail volume growth of over 1% for this date-span; Denmark averages 1.5% per year, and the Netherlands averages 1.3%. Sweden and Norway’s trends average 0.8% and 0.7% growth per year back to January 2020. Germany posted a compounded annual increase of only 0.6% annually, while in the U.K., in the wake of the problems that COVID and Brexit created, saw its retail sales volumes decline annually by 0.4%, marking a 2.2 percentage point decline in retail sales since January 2020. It has been a weak environment for retailing.

Recent sales performance: Up-to-date observations for April show declines in retail sales volume in Germany, Denmark, and the U.K., with flat sales in Sweden. Norway logs an increase of 0.3% month-to-month, and the Netherlands logs an increase of 1.6% month-to-month. The sequential data, looking at sales over 12 months to six months to three months, largely points to a continuation of this period of lethargic sales. Germany, the U.K., and Norway each are posting a sequential deceleration, as the rate of sales slows over progressively shorter time periods. Denmark and the Netherlands have somewhat erratic performance on retail sales, with no clear trends. Sweden stands alone as the only country with retail sales clearly accelerating, rising 4.2% at an annual rate over 12 months, at a 4.4% annual rate over six months, and at a 5.8% annual rate over three months.

Challenging outlook The retail environment remains challenging in Europe. Oil prices are rising; the European Central Bank is expected to take steps to deal with excessive inflation and rising oil prices with at least one rate hike. The war in Ukraine remains hot; the war in the Middle East may be cooling down, but the Strait of Hormuz is still not open for business. The global economy continues to face significant challenges.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 03 2026
Composite PMIs Ride Weakening Trend
With 25 countries in the mix, it can be hard to draw a simple summary statement about the condition of the global economy judging from the S&P composite PMIs. The manufacturing sector has recently been doing better, while the services sector is still in an extreme bout of lethargy globally. Fewer countries issue specific services sector indexes than issue manufacturing or composite PMI results.

The services sector tends to dominate the composite readings, so what we see this month is a great deal of weakness in the S&P composites, reflecting service sector weakness. The 18 early reporting manufacturing reporters registered a median queue ranking in their 67.7 percentile; that compared to a median ranking of 26.2% for this group of 25. However, the two groups are not the same. If we recalculate for the 10 common reporters, we get a median manufacturing ranking of 61.5% compared to a composite median ranking of 23.8%; for those same ten, the services sector median ranking was in its 16.9 percentile. That is a ranking that seems to flirt with recession potentially. To that point, in May 2026, eleven of twenty-five composite PMIs registered diffusion values below 50, indicating contraction.

In May, among the 25 reporting composite PMI reporters, 44% of them were weakening month-to-month, which is less than half but still a very large proportion and not particularly good news; this followed 48% weakening in April and 84% weakening in March. So, with the heating up of war in the Middle East and the closure of the Strait of Hormuz, service sector conditions have gotten a lot worse even though it might have seemed logical that it would be the manufacturing sector that would suffer. The PMI data do not bear out that expectation. In March, the global PMI data improved only in Spain, Sweden, Zambia, and Ghana—thin gruel for good news.

On a monthly basis, there is sequential weakening in progress in the European Monetary Union, France, Ireland, and Japan.

If we look at the broader sequential data over three months, six months, and 12 months, we see that conditions have gotten progressively weaker, with 82.6% of these reporters weaker over three months, 78.3% weaker over six months, and 43.5% weaker over 12 months. There is progressive weakening on this broader timeline in the United States, Spain, India, Saudi Arabia, and the United Arab Emirates. There's sequential improvement indicated only in Singapore.

The queue percentile standing evaluations at the far right of the table rank and therefore order the data across these reporters, on observations back to January 2021. On that relatively long timeline, only 5 reporters have current readings above their respective 4.5-year. medians. Those are Singapore, China, Nigeria, India, and Sweden. On this timeline, the French composite is at its absolute lowest ranking of the period. The European Monetary Union reading is in its lower 10th percentile, with the four largest monetary union economies each having a ranking below their respective 35th percentiles. The U.S. ranking is in its 26th percentile, roughly just above the bottom quarter of its raked results. The U.K. is in its lower 18th percentile. Japan is near its median, at its 49th percentile; however, none of these readings are reassuring. For example, Japan’s near 50th percentile ranking compares to a weaker U.S. ranking, but the U.S. composite PMI diffusion value at 51.5 is stronger than Japan’s at 51.1. But the U.S. value is weaker relative to its history back to January 2021. Japan’s higher ranking actually simply refers to performance that is still quite weak, but nearly as good as it has done over the past 4.5 years. It is important to keep the relative (ranking) and the absolute (diffusion value) comparisons separate. Diffusion values are not presented in the table—except for a few averages/medians—because putting those data in table for the countries is prohibited by the data provider.

The weakness is broad-based. While the manufacturing sectors have been digging out, the services sectors have continued to worsen during the improvement in manufacturing—which I take to be a bad sign. Manufacturing tends to be the more sensitive signal, and we often think of manufacturing showing a turnaround in the economy before it becomes a process involving the entire economy. But in this case, it doesn't look like the manufacturing revival is progressing across the various economies. Certainly, one reason could be rising oil prices and the fact that oil prices eventually become an input to just about every single business—because if it's not a direct input, it's an indirect input through its impact on transportation costs.

Broad but mild slippage If we look at the average and median PMI values, we can see that while there has been broad slippage, the slippage has been quite slow. The average reading for this group over 12 months is the PMI at 52; that has slipped to 50.8 over three months and sits at 50.8 in May. The median for the group is 51.8 over 12 months; it has slipped to 50.6 over three months and registers 50.2 in May. The bad news is more that these economies have lingered at very weak readings than that there is technical slippage in progress. Over 12 months, there were only four of 25 reporters with PMIs below 50. Over three months, that figure has mushroomed to 9, and as of May, there are 11 reporters with PMIs below 50, indicating economic contraction. These are poor trends and clearly ones to watch. Weakness has been driven by the services sector where we get fewer observations and data, and this is a sharp counterpoint to some of the manufacturing data that have been improving.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 02 2026
EMU Inflation Accelerates
The chart shows European Monetary Union inflation using seasonally adjusted data to produce 12-month, 6-month, and 3-month compounded annual rates of change for the core, yielding a clear picture of acceleration. The core rate is supposed to be relatively less affected when energy prices spurt. However, in this case, the increase in energy prices is so large that it is being passed on across commodity classes because of its impact on transportation costs, an effect that is ubiquitous.

Every product must be brought to market, and apart from that, products have different intrinsic exposures to energy as a direct or indirect input, either because it's a chemical, it uses plastic, or it's more insulated as a service. However, the impact on transportation costs is broad.

The table shows year-over-year inflation monthly, and there you can see that the headline is moving up more than the core. However, the core rate is moving up, and at 2.5%, it's far enough above the ECB's 2% target for it to be considered too strong. The headline rate in May at 3.2% is considerably higher and stronger, but it's also more affected by energy prices and therefore it may represent something the ECB could view with a bit more flexibility. However, the strength in the core is going to cause the ECB more problems.

Along the bottom of the table, we look at the details on inflation to see the incidence of acceleration of inflation over three-month and six-month periods to give trends a bit of breathing room to develop. For both the headline and the core, the breadth of inflation is rising. Headline and core measures both are rising in nearly two-thirds of the categories (62.5%).

We take a broader look to see where inflation ranks historically on data back to 2001. The headline measure has inflation at the 88.5 percentile, while core is at the 86.2 percentile. Both demonstrate considerable strength in May. Looking at the details by category by stepping back one month to April, we find that one of the highest standings for inflation is in transportation, which is no surprise given what's going on with energy prices. Communications products, however, have a high inflation at their 98.7 percentile. Personal care products have a standing on their 92nd percentile, another high standing. Inflation for recreation and culture has a relatively low standing in its 36th percentile, and house furniture and maintenance prices have only a 16.4 percentile standing.

There are differences in inflation rates and inflation pass-throughs from energy effects. But the dispersion of inflation is only about a top one-third phenomenon—high but not extreme. That suggests that the impact on inflation, while significant, is not—at least not yet—dominant. We'll be watching indicators like this to get some idea of how impactful and broad the effects of inflation from the Middle East conflict are and how they will develop. For now, the impact is substantial and still seems to be in full swing.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 01 2026
Manufacturing PMIs Show Continued Resilience
Manufacturing PMIs continue to show an uptrend in place. The median estimate for the 18 early reporting countries of manufacturing data is 51.6. It shows expansion at a relatively weak pace, with a slight month-to-month backtracking in the overall median reading for the 18 countries. That median fell by 0.8 points month-to-month. However, the broader readings over three months, six months, and 12 months each are above 50, and each of them shows an increase compared to the previous period. So, while there was a minor monthly setback, the overall reading shows conditions are broadly improving, and output is advancing, in manufacturing. Over a longer time horizon, changes over three months, six months and 12 months are on an improving path.

Diffusion statistics that show that proportion of readings that are getting better reveal a split of 50/50 month-to-month. However, over three months, 66.7% of reporters are improving; over six months compared to 12 months, 72.2% are improving; and over 12 months compared to a year ago, 77.8% are improving. Momentum remains in an upward direction over various horizons even in the face of month-to-month volatility in readings.

The bottom of the table shows grouped results for different batches of countries. The developed country group—the U.S., the U.K., the European Monetary Union, Canada, and Japan—show an improvement over 12 months, six months, and three months. The Asian average shows the same conditions holds with continued improvements in train. However, the BRIC countries show more stasis, with their PMI readings not clearly advancing and hovering just short of an average value of 51 on their pooled diffusion gauge.

The ranked percentile standings have made a great deal of progress over recent months. Currently, the median standing of the full-period medians for the 18 countries in the table shows an 84.7 percentile standing, which is quite impressive. Only five countries—Russia, India, Brazil, Indonesia, and Mexico—have ranked standings below their medians on data back to 2022.

The PMIs remain relatively upbeat this month despite the ongoing war in Ukraine and in the Middle East, and the constraint on traffic through the Strait of Hormuz. The manufacturing sector is showing surprising resiliency in the face of these hurdles for data up to date through May.
by:Robert Brusca
|in:Economy in Brief
Global| May 29 2026
EMU Early Inflation Readings Rise in Large Countries
In the post-COVID cycle, inflation in Italy hit its low point early in 2023 and then again late in 2024. However, for the other large monetary union economies, France, for example, inflation hit its low point early in 2026 at a pace of about 1.1%. Germany, the traditional low-inflation country in the monetary union, has had more difficult times with inflation post-COVID. For this reason, the low point for German inflation came early in 2026 (and in mid-2025 at 1.9%). For France and Italy, headline inflation began escalating very early in 2026. For Germany, the escalation was a little later, and the spiky part of inflation was blunted on the early side; inflation has actually tipped slightly lower now, in May. However, despite these differences in timing, the overpowering sense is that inflation in the large countries has turned higher early in the year, and the European Central Bank will have some decisions to make.

Month-to-month price changes In May, inflation decelerated in Germany, with the month-to-month observation going unchanged. Headline prices in Spain rose by 0.2%, in France by 0.3%, and in Italy by 0.4%. German prices excluding energy have been making steady gains for the last several months, rising by 0.2% in May; Italian core prices rose by 0.4% after being flat in April and declining sharply in March; in Spain, the core CPI rose by 0.2% for the second month in a row.

The monthly statistics on inflation from the headlines and core rates for these countries are not off-the-charts or particularly troublesome. However, when put in context in terms of 3-month, 6-month, and 12-month inflation rates, the headlines and the cores trace more disturbing patterns.

Sequential trends in the HICPs Headline inflation for these countries shows over three months that inflation has a rate excessive relative to the ECB's target for the European Monetary Union as a whole. There are no country-by-country targets from the ECB, only an objective for the union-wide result. German inflation over three months is the weakest, as it logs a 4% annual rate. Italian inflation is the strongest, rising at an 8.6% annual rate. Over six months, inflation is excessive in all four of these countries. The weakest gain is in Germany at 2.4% at an annual rate; the strongest is in Italy at a 5.9% annual rate. Over 12 months, inflation is also excessive across the board relative to the ECB's overall monetary union target of 2%. The weakest gain in 12-month inflation is Germany at 2.6%, while the strongest is Spain at 3.6%. Additionally, inflation is accelerating from 12-months to six-months to three-months in both France and Italy. Although inflation is not accelerating in that three-period sequence for Germany and Spain, it is not far from doing so. All of these are going to be uncomfortable metrics for the European Central Bank to navigate. These are the headline rates for the large EMU countries, and they are clearly being pushed up by energy prices on the constriction of traffic through the Strait of Hormuz.

Core and ex-energy inflation trends Three of the four largest EMU economies give us either core inflation or inflation excluding energy metrics. On that basis, two of three economies, Germany and Spain, show excessive inflation over three months annualized, at 2.7% for Germany and 3.4%, for Spain. We compare them to the target set by the ECB for the European Union overall. Italy is the exception, with core inflation falling 0.4% at an annual rate over three months. Over six months, Germany, Italy, and Spain all have core inflation rates at or above 2%. Italy's rate comes in at 2%, Germany's ex-energy rate is at 2.2% annualized, while Spain’s CPI core checks in at 3% inflation. Over 12 months, inflation in Germany excluding energy is 2.3%, in Spain the CPI core runs 2.9%, while in Italy, inflation is still restrained for the core measure at a 1.8% annual rate.

Headline inflation and rising energy prices clearly are generating pressures such that even the core conditions aren't looking good. Core inflation rates above 3%, as we see in Spain across nearly all three timelines, are disturbing to the monetary authority. German inflation is moderate at 2.2% over six months and 2.3% over 12 months, but then it rises to a more disturbing 2.7% over three months. So far, Italian inflation is not an issue, at 1.8% over 12 months, 2% over six months, and even declining at a 0.4% annual rate over three months.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| May 28 2026
U.K. CBI Industrial Quarterly Survey Weakens
The Confederation of British Industry (CBI) shows business optimism falling sharply in Q2 2026, joined by a drop in export optimism. Expectations for capital goods spending excluding buildings improved slightly on the quarter, with the index reading rising to -38 from -44. Expectations for capital spending excluding equipment fell significantly to -36 in the second quarter from -22 in the first quarter. The two capital spending measures each have rankings below the 20th percentile; for capital spending excluding buildings, the figure is extremely weak.

The number employed over the last three months shows a slight decline to -19 from -16; however looking ahead to the next three months, the decline repeats, falling to -26 from -18 in the first quarter. The rankings for these two metrics are both in the low 30th percentiles.

New order volume for three months ago and three months ahead remain weak, with the three-month ago reading stuck at -21 and the three-month-ahead reading falling from -12 in the first quarter to -31 in the second quarter. The rankings for these two metrics are each at the 15th percentile or lower.

The volume of domestic orders for three months ago edged slightly lower, to -25 from -23; however for three months ahead it weakens more sharply to -32 from -17. Both of these metrics have rankings at the 15th percentile or weaker.

The volume for foreign orders from three months ago improved to -4 from -12. The volume for three months ahead has weakened only slightly, from +1 in the first quarter to -2 in the second quarter. The three-month-ago reading has a 35th percentile ranking, while the three-month-ahead ranking is at its 47th percentile. The foreign sector appears to be carrying some stimulus to the U.K. economy.

The volume of output from three months ago was slightly weaker in the second quarter, while the volume of output for three months ahead is expected to weaken from a -14 reading in Q1 to -20 in Q2. Both metrics have a lower 10th percentile standing.

The average cost of output three months ago rose sharply to an index reading of in the second quarter 54 from 33 in the first quarter. Looking ahead to the next three months, another ratchet up is in progress, to a reading of 79 from 50 in the first quarter. These are suddenly extremely strong readings, with three-months-ago reading at a 78th percentile standing and the three-month-ahead reading at essentially a 90th percentile standing.

The average price for domestic orders three months ago has gone up from an index value of 2 in the first quarter to 17 in the second quarter, while the average price for domestic orders for three months ahead edged up to a reading of +32 from +29 in the first quarter. The three-month-ago reading has a 53rd percentile standing, while the three-month-ahead reading has an 89th percentile standing. Price expectations are hot.

The average price on foreign orders for three months ago rose from -4 in the first quarter to +15 in the second quarter, logging a 49th percentile standing, pretty close to its historic median. The average price for foreign output for three months ahead moved down to +19 from +23 in the first quarter and has a very strong 91.8 percentile standing. The Q/Q pressure eased a bit but remains intense.
by:Robert Brusca
|in:Economy in Brief