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

Germany| Mar 10 2026
German Exports and Imports Slide in January; Sharp Import Drop Boosts Surplus
German trade flows weakened in January, with imports dropping 5.9% month to month and exports falling 2.3%. With both flows falling sharply and imports dropping at more than twice the rate of exports, the trade surplus in the month ballooned to €21.2 billion from €17.4 billion in December.

The progression of nominal growth rates for exports shows the slowing from 0.6% over 12 months to 0.3% over six months to -3.1% at an annual rate over three months. The import decline is weaker and is gathering even more downward momentum, with imports falling 4% over 12 months, dropping at a 7.4% annual rate over six months, and reaching a 15% annualized decline over three months.

Measured in real terms, exports fell by 2.9% in January as imports fell by 6.8%. The sequential growth rates for German exports and imports both show progressive deterioration, with imports weakening faster than exports. This trend is worrisome because it says that the nominal weakness is not just because of what prices are doing. Weak imports usually indicate weak domestic demand; for Germany, that could be a really bad signal. In addition, because Germany exports so much to other EMU nations, German export weakness raises questions about demand strength among fellow EMU members - and about global demand in general.

Lagged trends Lagged results give us a look into export and import trends with a one-month lag. As of December, both exports and imports still rose month-to-month. Sequential export growth was steadily accelerating, while sequential import growth rates were already decaying. German consumer goods exports were accelerating sequentially, and the ‘other exports’ category is not on its own acceleration path, but the category remains strong.

For imports, the overall nominal flows were decelerating from 12-months to 6-months to 3-months. Capital goods and motor vehicle imports both showed sequential weakening. Consumer goods imports were oscillating but still generally strong. Other imports were on a recent accelerating path, switching from negative 12-months growth to a 1% gain over six months and a 4% pace of increase over three months.

Summing up On balance, German trade trends show a lot of weakness. Much of it seems to have welled up in January ahead of the new Middle East conflict. Right now, German economic data and diagnostic trade data are not sending out good signals about the German economy.
by:Robert Brusca
|in:Economy in Brief
Germany| Mar 09 2026
German Output Trends in January Break Lower
The German industrial sector falters German industrial output in January fell for the second month in a row; it has a sequential pattern of growth rates becoming progressively weaker from 12-months to six-months to three-months. This is not a good pattern or development. Orders also fell sharply in January, dropping by 11.1% month-to-month. At least the orders progression is not as clearly negative as it is for industrial output, but over three months real manufacturing orders are declining at a 1.8% annual rate even though the 12-month and six-month growth rates of orders still show solid positive growth results.

These data are up-to-date through January, so they do not contain any effects of the new conflict in the Middle East.

Sequential output trends German industrial output trends show progressively weaker numbers from 12-months to six-months to three-months. Consumer goods output and intermediate goods output show progressively weaker sequential results. Capital goods output shows a skinny rise of 0.1% over 12 months, a 6.6% decline at an annual rate over six months, and then a lesser pace of decline of 2.8% over three months. Capital goods output is not getting progressively weaker; however, it has been weakening and the trend is disappointing.

German survey results are less dire Other indicators of German industrial activity generally show improved monthly results. All four of the metrics in the table show improved survey values in January compared to December, but December had showed weakness relative to November across the board for those 4 metrics. The message from progressive averages in the table, from these other indicators, is that not much has changed that would allow us to discriminate strongly among activity performances reported over 12 months, six months, or three months. In the end, the three-month values are generally slightly stronger than the 12-month values, but not in a way that looks significant, and even that result does not hold for the ZEW current index.

Industrial production in other Europe Industrial production trends for other European reporters show declines in output in January of a fairly substantial magnitude in Spain and in Ireland, against strong increases in Portugal, Sweden, and Norway, and the more modest increase in France. IP in January shows cross-currents and a good deal of extremism in other Europe. The progressive trends for manufacturing production show Spanish and Irish trends deteriorating sharply from 12-months to six-months to three-months France and Portugal report uneven results that do not clarify what the underlying trend is doing. However, in northern Europe, Sweden and Norway are showing sharply accelerating growth from 12-months to six-months to three-months.

Quarter-to-Date (as of January) In the quarter to date, German manufacturing output is falling overall and for all its major components. German real manufacturing orders are falling at a 30.3% annual rate in the quarter to date, which is a nascent statistic since only January data are available now. The other industrial indicators show positive trends for most measures, with the IFO manufacturing expectation being the exception, as it weakens. Industrial production for other Europe shows sharp quarter-to-date declines in Spain and Ireland, with extremely strong quarter-to-date results in Sweden and Norway; there is strong performance from Portugal and a solid increase from France.
by:Robert Brusca
|in:Economy in Brief
Norway| Mar 06 2026
Norway: Output Advances in January
Industrial output in Norway rose by 1% in January after gaining 0.9% in December. Utilities output rose briskly, mining and quarrying output rose extremely sharply, while manufacturing output showed its second decline in a row.

The sequential growth rates show that the headline series for industrial production is decelerating, with nearly 7% growth over 12 months, nearly 5% growth over six months, and the growth over three months is down to zero.

On that same progression, utilities output has accelerated from 12 months to six months to three months, while mining and quarrying has a more complicated pattern—rising 1.5% over 12 month, falling at a 3.8% pace over six months, then rising at a 9.2% annual rate over three months.

In manufacturing, the trends are also complicated but with an upbeat ending. Manufacturing output is up by 2.2% over 12 months; the growth rate shows a decline, falling at a 0.4% annual rate over six months, with output then picking up and growing at a 5.9% annual rate over three months. Despite the setback in the middle, manufacturing has a positive year-over-year growth rate and shows strength over three months. This pattern is followed by food and also by textiles, with the exception that textiles are still showing a year-over-year decline of 0.9%. However, textile output is now growing briskly at a 7.4% annual rate over three months.

Norway is also experiencing a pickup in inflation. Its HICP inflation rate is 3.5% over 12 months, stays pretty much there with a 3.4% annual rate over six months, and then jumps up to a 4.9% annual rate over three months. However, that acceleration is tempered by a core inflation rate that is unchanged at 3.2% in each horizon. These growth rates are still excessive, with the central bank having a target of 2%; however, the inflation rate isn't getting any worse.

The industrial pattern for Norway is somewhat complicated by the fact that the headline measure for industrial production is showing a clear deceleration, while manufacturing is showing a more complicated pattern with some near-term acceleration over three months.

And for the quarter to date, which is a nascent comparison since the data are only available through January, we have overall industrial production growing at a 2.7% annual rate and manufacturing growing at a 2.2% annual rate. The quarter also shows inflation flying at a 3.9% annual rate, although core inflation is more tempered at a 2.6% annual rate pace.
by:Robert Brusca
|in:Economy in Brief
Europe| Mar 05 2026
European Retail Sales Dither While Auto Registrations Weaken
Motor vehicle registrations in January fell by 6.1%, while overall retail sales volume, a separate category, fell by 0.1%. Motor vehicle registrations are notoriously volatile; they increased by 1.8% in December and fell by 3.3% in November. Retail sales, however, have been more chronically flat, with no change in November, a 0.2% increase in December, and now a 0.1% decline in January. These numbers are quite weak because they're already inflation-adjusted, expressed in volume terms.

Sequentially volume sales are weakening in the EMU, with the growth rate slipping from 2.1% over 12 months to a 1.4% pace over six months to just a 0.4% annual rate gain over three months. Food sales have been more stable but have been somewhat more erratically weakened over this same period. Motor vehicle registrations have been imploding, falling by 3% over 12 months, dropping to a 12.4% annual rate over six months and plunging at a 27.1% annual rate over three months.

In the unfolding quarter to date, with one month's data in hand, first quarter retail sales are rising at a 0.2% annual rate; food sales are rising at a 2.7% annual rate. Motor vehicle registrations are declining at a 31.3% annual rate.

We can also inspect these data on a country by country basis. We have Germany and the Netherlands from the European Monetary Union, Sweden and Norway representing Northern Europe, the United Kingdom as a nonaligned former monetary union member, and lastly Denmark as an EU member.

Germany is the largest economy in Europe, and its sales fell in January. More disconcerting, sales in Germany are generally on a decelerating path, growing at a 1.2% pace over 12 months, at a 0.5% pace over six months, and contracting at a 1% annual rate pace over three months. The Netherlands, another monetary union member, is experiencing a very different trend, with sales rising by 3.3% in January and then accelerating from 12 months to six months to three months as growth rates have progressed from 1.4% to 6.1% to 8.8%, respectively. In Denmark, a European Union member but not a monetary union member, sales rose by 0.7% in January, while its sequential sales show growth rates of 3.7% over 12 months and 3.8% over six months, and then suddenly weaken to 0.4% over three months.

The United Kingdom is showing a progression of sales that is fairly firm. In January, sales rose by 1.9%. The annual growth rate is at 4.5% over 12 months, easing slightly to 3% over six months, and then jumping to 7.7% over three months.

Sweden and Norway are fellow Northern European economies but do not share the same trends in retail sales. In January, Swedish sales rose by 0.1%, while Norwegian sales rose by 1.1%. The progression of growth rates in Sweden shows sales over 4% over six months and 12 months, with the growth rate decelerating to 2.1% at an annual rate over three months. In Norway, 12-month and 6-month growth rates for sales are at 3% to 4% and then jump to a 7.3% annual rate over three months.

Monthly data on sales volume growth have been irregular. January was the most consistently strong month of the most recent three, albeit with Germany posting a significantly large drop in retail sales, which is disconcerting for the largest economy in the euro area.

The sequential data show sales accelerations in the Netherlands and in Norway juxtaposed once again to Germany, where sales growth rates are decelerating and culminate in declining growth over the most recent three months. Sequential data also show a clear deceleration in sales volumes for the euro area as a whole. In addition, there is a significant sales implosion for motor vehicle registrations on the same timeline.

The quarter-to-date data for the euro area show weak sales growth, while the country level data show sales increasing for all the countries in the table except Germany in the quarter to date, which is a nascent calculation at this point.
by:Robert Brusca
|in:Economy in Brief
Global| Mar 04 2026
S&P Composite PMIs Show Recovery Progresses
The composite PMIs showed modest increases on their full sample average and a modest step-back in the full sample median calculation in February. However, the number of areas below 50 fell to 4 in February; that count was only 5 in January, and there were none showing declines in December, so there's a great sense of progress in place. The proportion of reporters in February that were getting worse was only 40%, compared to 44% in January and 76% in December. So there has been a change for the better in terms of the proportion of these 25 reporters who are registering better growth month to month in the last two months, in particular.
by:Robert Brusca
|in:Economy in Brief
Global| Mar 03 2026
Inflation in Europe Picks Up – Ahead of Hostilities
Inflation in the European Monetary Union picked up in February, ahead of the beginning of new hostilities in the Middle East. The increase in the harmonized index of consumer prices moved up to 0.3% in February from 0.1% to January. Progression on the annual rate of price increase moved up to 1.9% over 12 months, to a 2.1% annual rate over six months, and to a 2.4% annual rate over three months.

This is a modest acceleration and not something to get particularly excited about, except that with new hostilities in the Middle East, oil prices have begun to rise significantly, and there will be apprehension about how much more there is to come. However, the initial oil price reaction was muted, and the follow-up price reaction has also been relatively muted so these will translate into a nontrivial impact on inflation and in the harmonized index for consumer prices in the monetary union, as well as in the key prices watched by central banks globally.

Big Four Economies The Big Four economies in the monetary union produced scattered results in February. Germany produced no increase in its February HICP. The HICP for France jumped by 0.4% month-to-month. Spain showed an increase of 0.2%; Italy reported an outsized increase of 0.7% in February. Still, the January and February data for this group of countries show prices mostly very well behaved. If we simply multiply these 12 increases (four countries over three months) together we get prices rising at a 2.2% annual rate across all the countries over the three months. That is close to target.

Annual and Sequential Big Four Inflation Inflation for the Big Four economies ranges from a top pace of 2.4% in Spain to the lowest pace of 1.1% in France with Italy's 1.6% and Germany's on-target 2% making up middle cases. Even the biggest price increase from Spain at 2.4% is not particularly frightening. Inside of 12 months looking at the six- and 3-month trends, Germany's trends move up to 2.6% over six months and then down to 1.2%. France's 6-month inflation remains at 1.1% over six months but then moves up to a 1.9% annual rate over three months. Italy's 12-month pace of 1.6% holds in place over six months, but then the 3-month inflation rate jumps to a 4.1% annual rate. For Spain, the 2.4% 12 month rate rises to a 3% annual rate over six months and then falls sharply to a 1.6% annual rate over three months.

Headline vs. Core Inflation Headline inflation rates, of course, are mercurial because of the impact of oil prices on them. Two early reporters gave us core inflation or ex-energy inflation rates. In the case of Spain, core inflation is stuck at 2.7% on all horizons. Germany's index excluding energy is at 2.4% over 12 months, but then Germany’s six-month pace falls to 2.2%, and its three-month pace falls again to 1.7%. In the case of Germany, 12-month ex-energy inflation is mildly acceptable, but progressing to the three-month horizon, the inflation rate drops back well into place. For Spain, the 2.7% 12-month inflation rate persists across all horizons and is unacceptably high.

Longer Trends Inflation is generally behaving and riding downtrends in the monetary union, with 12- month inflation generally lower than 12-month inflation was a year ago. That is true for all the major metrics in the table except two. The first exception is France when the 12-month inflation rate is 1.1% compared to 0.9% over 12 months a year ago (still, obviously very well behaved). In the case of Spain, core inflation moves up to 2.7% over 12 months after being at 2.2% just a year ago.
by:Robert Brusca
|in:Economy in Brief
Global| Mar 02 2026
S&P Manufacturing PMIs Show Improvement
The S&P manufacturing PMI readings for February 2026 continued to show improvement, particularly on a sequential basis.

The chart shows a clear upward tendency for the United States, Japan, and the European Monetary Union where the manufacturing PMIs have been on an increasing track for some time. Japan just surpassed the U.S. this month where the manufacturing PMI reading surged above 50. The U.S. has been steady at that level for a number of months; Japan has just moved up while the euro area reading is starting to show some upward trend.

The table takes the underlying diffusion levels reported by these 18 early reporters and shuffles them into six different cohorts to summarize their performance over different periods.

In February, we see twice as many reporters in the cohort between 55 and 60 as we saw in January; that proportion moved up to 11.1% from 5.6%. The proportion in the 50 to 55 diffusion category (mild improvement) was unchanged at 55.6%; the proportion showing mild below median performance declined to 33.3% in February from 38.9% in January. The other cohorts showed no membership.

If we look at the data grouped into sequential categories of three-months, six-months, and 12-months, we see the neutral to mildly positive category of 50% to 55% moving from 28.2% of total membership over 12 months to 39.8% of membership over 6 months to 55.6% membership over 3 months. This is a clear improvement in performance over this timeline for the category indicating moderate expansion. The stronger expansion category of 55 to 60 shows a membership of 5.6% for all three-time horizons. The category showing weak declines in the 40 to 50 range for diffusion declined steadily from 66.2% over 12 months to 54.6% over 6 months to only 38.9% over 3 months. Over the last three months, fewer than 40% of the reporters were showing mild declines, 55% of the reporters were showing unchanged-to-moderate increases, while relatively larger increases have been posted by 5.6% of the reporters.

Looking back to the right of the table, we can compare the recent 12-month figures to the previous 12-months and to the 12-months before that to get a sense of the smoothed trend. There what we see is the 50 to 55 category three years ago was at 28.2% of the reporting membership; it moved up to 38% of the membership over just a year ago whereas over the past year that membership had slipped to 28% in an environment where tariffs were imposed. Although, as we see from the sequential data, it has over the shorter periods of six months and three months been seeing an increase in membership in that category.

Over the earlier years, there was also stronger membership in the stronger growth category of 55 to 60 percentile. Three years ago, it registered 8.3%, then fell to 6.4% and now sits at 5.6% over the recent 12 months. Over the recent shorter periods of three months and six months, there has yet to be an improvement in that category. As for the weaker category the cohort from 40 to 50%, we see 62% of the membership in that category three years ago, and two years ago that had fallen back to 55.6%, but then over the past year it had moved up to average 66% of the membership: fully 2/3 of the reporting membership over the last year has been in the 40 to 50 the diffusion category though that membership proportion has been falling over the last six and three months.

The grouped statistics show that there is general progress in place and in line with what we see reported in the chart. In addition, we track the number of reporters That are improving period to period. From 12 months to six months to three months, we see that percentage of reporters showing higher diffusion readings steadily improving from 50% to 61.1% to 77.8%. We also track the number of reporters with diffusion below 50 (that is those that are showing contraction) and that number hasn't changed very much; it's at 13 over 12 months and over 6 months while falling only to 12 over 3 months.

However, if we step away from averaging and we look at the raw scores for the last three months, we see the number of countries reporting output that's contracting at 8 in December, at 7 in January and at 6 in February, a clearer sense of progress. Meanwhile, on the monthly timeline, there's also a sense of improvement - not in a monotonic sense – but there is a hint of better general tendency for the percent of reporters that are showing the tendency for higher diffusion to be reported to rise.

The diffusion statistics are up to date, and they basically describe the proportion of the reporters that are seeing activity improve or decline in the reporting area. Diffusion data don’t tell us how strong that improvement is, just whether it's present. Diffusion data tend to be sensitive. They tend to quickly be able to identify changes in trends and right now we're seeing an uptick, an improvement, in the levels of diffusion being reported in this 18-country sample for manufacturing. The results are not decisive, but they are encouraging.
by:Robert Brusca
|in:Economy in Brief
Europe| Feb 27 2026
Weak GDP Growth in Europe and Selected Countries Carries On
More countries have reported new results or firmed up their GDP results for 2025Q4. In the EMU, GDP grows by 1.3% year over year in the fourth quarter. The large EMU economies (Big Four) grow by 1% on that horizon, while the rest of the community grows at twice that pace, at 2.1%. U.S. growth on that timeline is 2.2%; Japan’s is 0.2%; and the United Kingdom grows by 0.9%. They are all weak compared to past standards. None of them rank at or above their respective 50th percentile standings on growth rates dating back to 1997.

In Europe, EMU nonmember Denmark’s growth at 3% has an over 50th percentile ranking, at 78.3 percentile mark. Ireland’s growth has a 60.9 percentile standing, while Italy and Portugal have growth rates near their respective 55th percentiles—above their respective medians but not by a lot.
by:Robert Brusca
|in:Economy in Brief
Europe| Feb 26 2026
EMU Indexes Back Off But Hold Uptrend
EU Commission indexes that assess economic performance for the countries in Europe and in the European Monetary Union slipped in February to 98.3 from 99.3 in January; however, the February reading is still relatively strong by recent standards and leaves the index largely in an uptrend.

The February readings saw the industrial sector unchanged, a small upward move in consumer confidence, and a one-point backtracking in construction, as retailing improved by a point. The services sector index stepped back by two points, putting it back at its December level.

Ranking standings for economic groups The key ranking of the sectors in February show only two of the sectors with readings above their medians (i.e., above a ranking of 50%). Those sectors are retailing with a queue standing in its 60.4 percentile and construction with its queue standing in its 79.3 percentile. Consumer confidence continues to be the weakest with a 27.8 percentile ranking, services check in with a 33.4 percentile ranking, and the industrial sector has moved up to a 43.6 percentile ranking. However, the overall monetary union ranking is only in its 41st percentile, substantially below its historic median which resides at a standing at the 50-percentile mark.

Country level performance Beyond the sectors, there are 18 of the 20 monetary union countries that provide early readings to this survey. Eleven countries showed weakened performance in February compared to January. In January, seven countries had weakened relative to December. In December, seven countries had weakened relative to November. However, in December, four of the countries that weakened were the four largest economies in the monetary union. In January, none of the largest four economies weakened month-to-month. Now, in February, we have three of the four largest economies weakening month-to-month, with the other one, Spain, posting an unchanged reading. The large countries in the monetary union have begun to have a little more difficulty over these last three months.

Standings by country Percentile-standing data showed that, of the 18 countries in the table, only 8 have readings that place them above their historic medians on data back to the mid-1980s. The large countries have split performance, with Italy reporting a 59.8 percentile standing and Spain reporting a 72.4 percentile spending, while the two largest monetary union economies, Germany and France, post readings in the 23rd percentile for Germany and the 44th percentile for France. The ranking for the monetary union as a whole is at its 41st percentile. That compares to an unweighted average ranking in the 44th percentile for all the countries when their individual rankings pooled and averaged. The two ratings are close together.

Apart from the Big Four Among the rest of the monetary union members, countries with readings above the 50th percentile are Malta, Greece, Lithuania, Latvia, the Netherlands, and Cyprus. Four countries vie for having the weakest reading in the table, with readings in their 20th percentile region. That list includes Big Four member Germany with the 23.5 percentile standing, Slovakia with a 23.8 percentile standing, Belgium with a 23.1 percentile standing, and Austria with a 22.1 percentile standing. There is considerable heterogeneity among the rankings of the monetary union member countries across all size classes. In addition, as we saw above, looking at the sectors, the sector rankings varied from a low of 27th percentile standing for consumer confidence to a high of 79th percentile standing for construction.
by:Robert Brusca
|in:Economy in Brief
Germany| Feb 25 2026
German Confidence: GfK Consumer Climate Erodes
Climate eased in March after improving in February. There still is a net improvement compared to January, but we must turn the calendar back to April 2024 to find a climate reading lower than the current level in March. In sum, there is no sense of ongoing improvement for climate in this report. The economic expectations and income expectations readings, which lag by one month, do show some improvement on a longer timeline. But the propensity-to-buy index is still quite weak.

Climate at -24.7 in March has an 8.2 percentile standing on data back to 2002. The economic expectations, reading, fell back to 4.3 in February from 6.6 in January to set a 49-percentile standing. Income expectations rose to 6.3 in February from 5.1 in January. Income expectations have a 42.4 percentile standing. The propensity to buy weakened sharply to -9.3 in February from -4 in January. Its percentile standing is at a 30.7 percentile level, a bottom one-third standing.

The table also presents consumer confidence readings for three other European economies. Among them, Italy has the strongest ranking at a 74-percentiel standing. The Italian reading is up-to-date through January and has been showing improvement. The United Kingdom and France have similar standings. The U.K. standing is at its 43.7 percentile mark, below its median on this timeline. The U.K. reading is up-to-date through January and has been showing a tendency to improve. France has a rank standing at a 39.7 percentile; it is up-to-date through February. The index has been very slowly improving.
by:Robert Brusca
|in:Economy in Brief
France| Feb 24 2026
French Manufacturing and Services Surveys: Two Sectors, Two Different Trends, and Lingering Weakness
Neither the service sector nor the manufacturing survey value is particularly strong. The services climate headline has a 25-percentile standing; it has been higher about 75% of the time. That is not a good result. For manufacturing and industry, the standing is just short of the 50% mark which leaves it quite close to its historic median. That is not strong, but it is not weak either; it’s a modest middle ground. But February’s reading gave up ground, falling to 102.1 from 105.4 in January, back essentially to its December 2025 level. Even so, the February value has not been exceeded persistently until we go back to August 2022—three and one-half years ago.

The rebound in manufacturing is nascent; we can question its sustainability. And it is also only a modest step up after February’s erosion. Orders and demand flared higher in January and backed down in February. Orders and demand have a 50-percentile standing, with foreign orders much stronger at a 75-percentile standing. While production has a sub-median, 42-percentile standing, responses, when aggregated, show an ‘own-personal’ response standing at 62.2%. Maybe there is more granular, industry-level confidence that is being restrained by macroeconomic pessimism. This two-tier response is recreated compatibly for prices where firms see high own price trends stronger than their whole-economy trend. The own-price trends are elevated with a ranking over their 60th percentile while the macro price expectation is at a 48-percentiel standing. Production expectations are a classical representation of this month’s survey, falling back this month after some improvement last month and sporting a 49.1 percentile standing – a near median result. The manufacturing survey does not suggest any trouble; it exhibits near normal behavior, with orders at a midstream level/ranking.
by:Robert Brusca
|in:Economy in Brief
Germany| Feb 23 2026
German IFO: Business Confidence Claws Its Way Out of a Hole
Germany's IFO index shows improvement in February compared to January. The climate index improves, the current conditions index improves, and expectations improve. All three all-sector headlines improve in February compared to January. However, all three metrics continue to register net negative readings, indicating that the sectors are showing more contraction than expansion, but less contraction than it had been the case previously. We ranked these headlines on data back to 1993; the climate index has a 22.5 percentile standing, expectations have a 22.4 standing, and current conditions have a 16.9 percentile standing. All three of the headline metrics have standings in the lower quartile of their queue of values back to the early 1990s. This is clearly not a stellar report but a report from an economy that is struggling. Even though it's widely reported that the climate index is currently on a six-month high; it may be on a six-month high, but it's not really much different than it was six months ago and only up by 1.1% from its lowest mark in the intervening five months—so not impressive. This is a grueling, crawling, dig-out from difficult circumstances. The COVID pandemic was a sucker punch to the global economy, and it was followed by the Russian invasion of Ukraine that hit Europe especially hard because of the proximity.

Since then, other geopolitical tensions have risen. Europe's relationship with the United States has deteriorated, in part because Europe—Germany in particular—was reluctant to detach itself from its mercantile relationships with Russia and was also reluctant to increase its financial participation in NATO. The U.S. was carrying the burden of the protective umbrella for Europe at a time when Europe didn't really think it needed a protective umbrella and so it was unwilling to pay for anything more substantial. When the rainy day came and when the Russian invasion of Ukraine occurred, Europe was completely unprepared and the U.S. was its protector. While Germany and other European countries quickly made it clear that they were fully on board with NATO defense, the U.S. was much less enthusiastic about carrying the burden after Europe had put its financial probity ahead of its defense spending obligations. Now Europe does not see the U.S. and its perceived greater needs for security because of improved navigation from the Arctic Circle to the North Atlantic.

These troubles continue to dog the relationship between the United States and Europe, and the European Community. And Europe’s own economic struggles continue. In the climate readings, all four of five sectors improve from January to February. Current conditions improve in three of the five sectors, with retailing and wholesaling slipping month-to-month. Expectations do improve overall, but three of five sectors take a step back in February, with expectations improving sharply for services, and substantively for wholesaling. Still manufacturing, construction, and retailing expectations stepped back.

Across the three broad areas of assessment across five sectors in each, there are only two (two of fifteen) sector metrics that rank above their 50th percentile (above their respective medians) when ranked against readings back to 1993. Both of those elevated rankings are for construction, one for Climate, and the other for current conditions, but construction expectations, at a 44.5 percentile standing, are not far below their median.

Still, the lowest environmental standings are for services, except under expectations where the services reading is second-weakest to retailing. The graphic shows some tendency for an upturn in climate and current conditions, but they are countered by an expectations path that has topped out and has been gradually leaning lower—and doing that with a current ranking in only its 22.5 percentile. So, while there is some life in the IFO survey this month, we are still looking at a patient in intensive care, not one ready to join Olympic competition—at least not yet.
by:Robert Brusca
|in:Economy in Brief