Haver Analytics
Haver Analytics


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

  • The S&P flash PMIs for the composite manufacturing and services sectors for the September readings show a stronger Germany, leading to a stronger reading in the European Monetary Union in the composite. Meanwhile, France, the United Kingdom, Japan, and the United States, all report weaker composite readings for September.

    Composites are broadly weaker- Germany’s strengthening is in the composite as well as for manufacturing and services separately. This helps to push the services sector in the EMU to a stronger reading although the EMU manufacturing reading is weaker month-to-month. France shows weaker readings in the composite as well as for both manufacturing and services. Japan follows suit on that score. The U.S. and the U.K. each report a weaker composite driven by a weaker service sector that dominates a somewhat stronger manufacturing sector in both the U.S and in the U.K.

    Only two composites show net expansion underway- Only the U.S. and Japan have composite PMI readings above 50 in September, indicating expansion. And the only sector readings with PMI values above 50 are for services in the U.S. and in Japan, as well.

    Sequential trends- The sequential readings from 12-months to 6-months to 3-months show weakening for the composite and for both sectors in the EMU, in Germany, in France, in the United Kingdom, and in Japan. The exception is the U.S. that is stronger on balance over 3 months for the composite and for the services sector. Comparing the 6-month PMI averages to the 12-month averages, conditions are broadly stronger across sectors and the composites. The exception is France that weakens on all three metrics. The U.S. and Japan strengthen on all three metrics, while the U.K. Germany, and the EMU strengthen on their services measures which dominate the composite, making it stronger over 6 months compared to 12 months. Comparing the 12-month readings to 12-months ago, everything is weaker except for services and the composite in Japan.

    Evaluation of PMI levels- The queue percentile standings rarely change much month-to-month and across these metrics we continue to see queue standings well below their neutral, 50% mark, generally below the 20% mark for most countries, across most sectors, with the sole exception being Japan that has the service sector reading at its 81st percentile; that helps the composite to a 75.5 percentile standing. However, despite month-to-month changes and broader trends in the sequential numbers, it's clear that the PMI values being posted are extremely weak.

    Net 3-month changes- The final column of the table shows the net changes over 3 months; over three months these are overpoweringly weak. They're negative numbers for all the countries and all the sectors with the sole exception of manufacturing in the United States. The last 3 months have been weak.

    On balance: The bottom line for the S&P flash numbers for September is that weak conditions continue to prevail and to dominate. There is some rebound in Germany that helps the European Monetary Union to post an uneven rebound, but the levels of activity indicated by the composite, the manufacturing sector and the services sector continue to be extremely weak.

  • Manufacturing and Services The INSEE surveys for France in September rose for manufacturing while it remained dead flat for services. The manufacturing survey rebounded to 98.6 in September but was still below its July value of 100.7. The manufacturing rebound in September is limited; activity remains weak, historically at a percentile standing of 31.3% in the bottom third of historic observations.

    Manufacturing Climate and production- Manufacturing production expectations in September remained negative but improved to -6.2 from -9.0 in August. The recent production trend worsened, falling to -6.3 from -4.0 in August. However, respondents referring to their own industry reflected a ‘personal likely trend’ that's much stronger at 14.1 compared to 2.5 in August. Survey respondents are downbeat on manufacturing overall, but upbeat on their individual sectors. That's a divergence worth watching. And it's also a rather significant divergence because the standing for the recent industry trend is at its lower 15th percentile whereas the standing for the ‘personal likely trend’ is at its 77.7 percentile. There's an extreme chasm between what respondents think is going to happen to industry overall compared to their optimism on their own individual surveys. Is it optimism or denial? Those two readings on ‘likely trends’ compare to an overall manufacturing production expectation that has a 39.7 percentile standing. That standing is below its 50th percentile, below its median, and weak.

    Orders and demand- Orders and demand are little-changed month-to-month in manufacturing. The September value is -21.4 compared to -21.2 in August. For foreign orders & demand, there is slight improvement to a reading of -13.9 in September from -15.1 in August. The percentile standing for overall orders & demand is a 32.8 percentile standing and that compares to a 44th percentile standing for foreign orders & demand; both are below median values, and both are weak.

    Inventories- The response for inventory levels declined slightly in September to 14.8 from 17.8 in August, but these are strong values with 87-percentile standing for the September value.

    Prices- Prices show increased pressure month-to-month with the ‘own likely price trend’ moving up to 5.2 in September from 2.2 in August compared to the manufacturing overall price trend that moves up to 8.9 from 5.0 in August. The ‘own likely price trend’ in September is still below its July value, whereas the manufacturing price level in September is assessed at twice its July level. The standing for the ‘own likely price trend’ is a 55.9 percentile standing, compared to a below-median 46.2 percentile standing for the manufacturing price level. While the assessment of manufacturing prices is below the assessment for the ‘own unlikely price trend’ the two standings aren't all that far apart.

  • The U.K. inflation reported in August paints a familiar picture of the trend for inflation. The CPIH measure rose by 0.4% after falling by 0.1% in July. The core measure excluding food, energy, alcohol, and tobacco was flat in August after rising 0.5% in July. Among the ten major headlines reported for U.K. inflation, the price level change accelerated in only four of them in August compared to July.

    Sequential inflation Sequential inflation in the U.K. as measured by the headline rose by 6.3% over 12 months, decelerated to a 4.6% annual rate over 6 months, and decelerated further to a 2% annual rate over 3 months. For the core rate, inflation rose 5.9% over 12 months, accelerated to a 6.2% annual rate over 6 months, and then fell sharply to a 3.2% annual rate over 3 months.

    The odd tale of core inflation The tracking of the core inflation rate by 3-month, 6-month, and 12-month calculations is presented in the chart at the top of this report, and it's clear that the 3-month inflation rate, even for the core, has broken sharply lower. For the 6-month rate, there is a more complicated bump-up in inflation before it begins to decline, leaving the 6-month increase slightly higher than its pace over 12 months. The 3-month inflation rate traces out a strange path in which it seems to peak in early-2022 as it proceeds to soften its pace through the end of the year, before spiking to a sharply higher peak rate and then diving sharply and essentially returning the inflation rate for the core back to what had appeared to be the downtrend for the earlier pace of decline before the secondary spike arrived. All of this makes evaluating what's going on in the core much more difficult since the 3-month inflation rate is so different than either the 6-month pace or 12-month pace. Also, because the core has exhibited this extremely rogue behavior, imbuing it with the kind of volatility we normally expect to see in the headline rather than in the core, trusting it becomes more a matter of faith.

    The Bank of England The Bank of England must be breathing a sigh of relief, in the wake of these developments. Not only has inflation turned lower but it's done it without having a substantial lift in the unemployment rate. The claimant rate of unemployment, that is more up-to-date, shows that unemployment has moved up to 4% in August from 3.9% in June, not much of an elevation particularly given the deceleration that has occurred in the inflation rate. The headline inflation rate has turned very sharply lower, and the core rate has turned low. The sequential rates of growth, however, are not the whole story. The core rate hasn't moved as much if we simply look at the performance of the year-over-year pace. But the performance in the core over 3 months and 6 months suggests that there's going to be more deceleration in the 12-month pace in the months ahead.

    Inflation diffusion The diffusion data that look at the inflation acceleration in one period compared to the previous period show that a year ago the 12-month pace was accelerating in all categories compared to 12-months earlier. Currently the 12-month pace compared to a year ago is accelerating modestly with the diffusion calculation of 54.5; for diffusion the neutral reading is 50%. At that reading, the proportion of categories with inflation accelerating and decelerating is balanced. Over six months, diffusion declines to a 45.5% level; over 3 months, it falls extremely sharply to a 9.1% level. Over 3 months, inflation accelerates only in one category. And that's comparing the 3-month rate to the 6-month rate that already has declined; the acceleration for inflation over 3 months is only from the category ‘education’ where the annualized rate for inflation ‘picks up’ to 3.7% from 3.6%. These are quite impressive trends for the U.K. if the trends have staying power.

  • Inflation in the European monetary area continue to be strong with August rising by 0.6% month-to-month after rising 0.4% in July and 0.2% in June. The closely watched core measure turned weaker in August rising by 0.3% after a 0.5% gain in both June and July.

    Monthly inflation basics Among the four largest euro area members, all but Spain showed inflation increases month-to-month. Posting a 1.4% increase in its July HICP, August brought a much lower 0.7% increase. And what was a significant month-to-month deceleration for Spain was also the second largest monthly headline gain among the Big Four economies. Core inflation for the four largest economies accelerated in only two of the four largest economies. Germany showed inflation excluding energy rising to 0.4% in August after a 0.2% gain in July; Italy's core crept up by 0.1% after being flat in July. The core inflation rate in France edged up 0.1% month-to-month after a 0.5% gain in July, while Spain’s core rose by 0.4% in August after rising a sharp 1.1% in July. Spain’s 0.4% core gain was a deceleration and also tied for the strongest month-to-month core gain across the Big Four economies in August. Comparisons always are complicated when you look for context.

    Trends in general When cast in terms of annualized inflation trends – 12-months to 6-months to 3-months- the trends were substantially mixed with negative results over three months. Inflation decelerations were broadly posted over 6 months compared to 12-months and for 12-month inflation rates compared to their values of 12-months ago. Headline inflation over 12 months broadly decelerates compared to 12-months ago while core inflation broadly accelerates.

    Headline vs. core trends-acceleration/deceleration Headline inflation in August rises 5.3% over 12 months. That decelerates to a 3.3% pace over six months then ramps up to a 5.2% pace over three months. The 3-month pace is sharply higher than the 6-month pace; and the 3-month pace is only a tick weaker than the year-over-year gain. Core inflation in the EMU is up by 5.4% over 12 months then decelerates to a 4.8% pace over 6 months. Over 3 month inflation comes back to life with the EMU core rising by 5% annualized, on balance a speed-up over 6 months and a moderate slowing by less than one-half of one percentage point comparing the 3-month pace to the 12-month pace.

    Sequential trends Looking at these same trends for headline inflation sequentially, all headlines show slower gains over 12-months compared to 12-months ago and another slowdown follows over 6 months compared to 12-months. But over 3 months headline inflation accelerates in all Big Four economies with two of them showing faster inflation over 3 months than over 12 months annualized. Inflation over 3 months accelerates compared to 12-months in Germany and Spain while it decelerates in France (by one-half of one percentage point) and in Italy where the inflation rate is nearly halved over 3 months compared to 12-months.

    Core inflation sequentially Core inflation is more interesting from a trend standpoint. It shows year-on-year accelerations in three of four of the largest EMU economies compared to its 12-month pace of 12-months ago. Only Spain shows less pressure over 12 months. Over six months core inflation pressures drop broadly across each of the Big Four economies and by significant amounts. But over 3 months inflation accelerates in two countries and decelerates in the other two. Inflation surges to a 7.9% annual rate in Spain over three months, topping both its 6-month and 12-month pace. In Germany, ex-energy inflation picks up from 3.6% over six months to 3.9% over three months and still shows a two-percentage point back down from its year-on-year pace.

    Oil continues to be a disinflation factor The bottom of the table chronicles the performance of oil prices showing Brent is still favorable monthly falling in both July and August -as well as declining on balance over 12 months, 6 months and 3 months.

    Inflation evaluation-strange brew The table shows still unacceptable inflation levels and less than reassuring trends across the largest EMU economies as well as for the weighted-average impact of all member countries on EMU itself. With an inflation objective of about 2%, the ECB finds the five-year headline gain (compounded pace) at 3.6% compared to 2.6% for the core rate. Headline inflation over five years for the Big Four range from a high of 4% in Germany to a low of 3.1% in Spain – had I tried to tell you ten-year years ago that would happen, you never would have believed me! And this is for inflation over five years – not a monthly quirk. Core inflation over five years averages the highest among the four largest EMU economies in Germany at 3.2% and the lowest in Italy at 2.3%.

  • Canadian housing starts have been in a pattern of saw-tooth declines from their 2021 peak. However, starts, viewed broadly, in a longer-term framework, are still quite firm. Starts are higher than their August 2023 level in only twenty-three of the last thirty-seven months, on data back to August 2020. Yet, the August 2023 reading is higher than nearly all monthly results prior to August 2020 (only seven exceptions on data back to January 1990 - 367 observations before August 2020). As a result, I view weakness in housing as limited and recent.

    In Canada, housing is not weak and is holding up well. This is despite a 5-year mortgage rate of 5.99% in July, up from rates at or below 3.3% from January 2021 through September 2021. On data from January 2021, Canadian 5-year mortgage rates average 4.12% Their current 5.99% level in July is significantly higher. But interest rates and inflation rates move together and inflation rates are now moderating.

    Canada’s 5-year mortgage rate is at 5.99%; historically it has been even higher from May 2006 through December 2008, more or less consistently. From January 1990 through December 2003, it also was above 5.99%. The current mortgage rate is high relative most recent historic experiences but not so much in a broad historic context. Still, mortgage rates moved up above their average since January 2012 (4.12%) as of April 2022 and rates have been elevated ever since. The five-year mortgage rate is currently on its cycle high, but it is only higher by 11 basis points from its level of eight months ago. The momentum for rising rates has dissipated.

    The period of interest rate shock would seem to be over for the housing market. Canadian house prices have fallen year-over-year for only four-months in a row (April 2023- July 2023). On data back to 2000, housing prices in Canada rose by double digits only from June 2006 to January 2007… until during the Covid period, when prices rose by double digits from April 2021 through May 2022. House prices in July 2023 in Canada are still stronger than April, May and July of 2023 and are lower only than a string of months from April 2022 to March 2023.

  • Japan's tertiary index (service sector index) recovered in July, rising to 101.8 from 100.9 in June after it had reached 101.6 in May. The July recovery brings the index of tertiary sector activity up above its May level and leaves it with a relatively high year-over-year ranking of its growth rate’s top 10 percentile standing on data since 2011. In contrast, industry stepped back to an index reading of 103.8 in July from 105.7 in June. The July value is still above its May value, but the sector’s growth ranking has it in its 20.5 percentile, approximately the lower one-fifth of its historic level by ranking. The industry index is 4.6% below its level in January 2020 before COVID struck; the tertiary index is higher by only 0.2% since COVID struck. These two sector indexes have been either weak or lethargic over this 3½ year period.

    Economy watchers indexes deliver a more upbeat reading; these diffusion indexes in July are all above 50 indicating expansion for the overall index and for the individual sectors the Economy watches index assesses. In July, the headline improved and most components improved, except for eating & drinking places and the overall metric for the services sector slipped to 57.5 in July from 60.7 in June but this reading still registers sector expansion. The economy watchers indexes have a growth ranking, for the most part, in the 80th to 90th percentile, the exception being a weaker ranking for employment growth.

    The Teikoku readings are also diffusion indexes; they indicate more weakness than the economy watchers survey. Manufacturing, retailing, wholesaling, and construction all have readings below the 50% mark indicating weakening growth. Services post a 51.7 diffusion reading, a reading that improves relative to June and indicates sector expansion. The growth ranking on the Teikoku indexes has manufacturing below its historic median for growth. Retailing and services have rankings above their respective 80th percentiles, marking them as relatively strong in terms of momentum.

    It is not surprising to have these somewhat sensitive diffusion indexes giving us slightly different perspectives on what's going on in the various sectors. This month the good news from the METI sector indexes is for services improving and that's important because services are the employment generating sector; the employment growth ranking in the economy watchers framework is the relative weakest barometer among the various sector assessments in that survey.

    The chart of the METI indexes for services and industry shows that not much has changed in the Japanese economy of late. The tertiary (services) index has continued to plug along somewhat sluggishly while the industry reading (mining and manufacturing) has been more volatile in a narrow range; it is currently riding a down cycle. But everything in the table for the month seems to be a reading in the normal flow of recent trends.

  • EMU inflation (month-to-month annualized) advanced at a 7.5% annual rate in August, up from a 5.7% pace in July. The year-on-year pace is at 4.2%. Countries showing the year-on-year pace of inflation faster than the overall EMU pace monthly are France, Germany, Italy, Portugal, and Ireland.

    Inflation HAS broadly decelerated Inflation broadly decelerates over 12 months compared to its pace of 12-months ago. Every country in the table shows deceleration on this basis. The deceleration of inflation on this basis is -5.7 percentage points for the EMU overall; the median deceleration across members in the table is -6.1 percentage points. The greatest deceleration on this timeline is the -16.5 percentage-point drop off in the Netherlands, followed by a -11.1 percentage-point drop in Belgium, and a -10.5 percentage-point drop in Greece.

    Compared to a year ago, the drop of in inflation is terrifically large. But that now seems to be a trend of the past that is withering.

    The road ahead has more twists and turns Economists warn that the hard part of inflation reduction lies ahead. When oil prices fall, they can unwind inflation substantially, broadly, and quickly. But once inflation has been high for a while, other prices begin to trend with it and the higher inflation rate becomes entrenched. A dropping inflation rate is good news; however, at some point, the pace of inflation needs to be the focus rather than just the change in the pace. The focus on other prices that become sticky if inflation lingers too high for too long, is usually a spotlight on wages, since labor seeks to get back the compensation it loses when inflation rises. So, wage gains rise at a faster pace and then policy is pushing to reduce both wage and price inflation.

    Inflation progress is slowing…down…does anyone care? Over six months, prices decelerate in the EMU by -0.9% at an annual rate compared to their 12-month pace. But deceleration only occurs for five of the twelve economies in the table (the EMU pace represents all EMU countries and is formed using weights reflecting the size of member economies). The median deceleration for 6-months compared to 12-months for reporting members in the table is not for a deceleration at all but for an acceleration of 2.7 percentage points.

    Over 3 months, EMU inflation rises to 5.2% annualized from 3.3% over six months, an acceleration of 1.9 percentage points. Among table members, there is, nonetheless, an average deceleration of 0.3 percentage points (annualized). That would become 1.2 percentage points if the pace held for one year. Over 3 months, six of twelve members show deceleration.

  • Industrial output and manufacturing output as well as sector detail for the European Monetary Union in July revealing drop in overall output and in manufacturing output, spurred by sharp declines in consumer durables and capital goods output weakness. Consumer nondurables show an increase in output of 0.4% in July while intermediate goods output is higher by 0.2% month-to-month in July. There is minor growth month-to-month in intermediate goods and nondurable goods, but that fails to offset the sharp drops in consumer durables and capital goods output.

    Sequential trends are not reassuring Sequential growth rates from 12-months to six-months to three-months show manufacturing output falling by 1.7% over 12 months, falling at a 6.2% annual rate over six months, and falling at a 4.4% annual rate over three months. Output falls over each of these horizons, but it's not getting progressively worse although it still falls faster over three months than it does over 12 months. Consumer goods output follows this same pattern with the declines on all three horizons and no sign of progressive deterioration but still with output over three months weaker than the output decline over 12 months. Within consumer goods, however, consumer durables output shows progressive deterioration with a drop of 6.9% over 12 months bested by a drop at an 8.7% annual rate over six months that then worsens to -14% at an annual rate over three months. In contrast, consumer nondurables output also declines on all three horizons but falls at just a 0.5% annual rate over 12 months, then declines much more sharply at a 6.9% annual rate over six months but then trims its fall to just a 0.4% annual rate over three months - slightly less then its pace of decline over 12 months. Intermediate goods output falls on all horizons, but the drops become progressively smaller as there's a 5% drop over 12 months, a 2.8% annual rate drop over six months, and a 1.6% annual rate drop over three months. Capital goods output shows an increase year-over-year, but that gives way to progressive deterioration in growth rates as its 2.6% output gain over 12 months collapses to a 5.4% annual rate decline over six months, and that worsens to a 7.7% annual rate decline over three months.

    Quarter-to-date growth On a quarter-to-date basis (July relative to the Q2 average for output) overall production and output in manufacturing drop at annualized rates of 5% and 8.5%, respectively. Declines occur in each of the sectors and in each of the consumer goods subsectors. The sharpest decline in output in the quarter is from consumer durable goods, declining at a 15.9% annual rate; that drop is followed closely by a decline at a 14.7% annual rate in capital goods output.

    Output compared to its pre-Covid level Taking a longer perspective… looking at output compared to where it was in January 2020 before COVID struck, both manufacturing and industrial output are higher on balance by 1% for overall output and by 1.3% for manufacturing output. Consumer goods output is higher by 6% on that comparison, consumer nondurables output is higher by 6.1%, and capital goods output is higher by 6.7%. However, consumer durable goods output is lower by 2.3% and intermediate goods output is lower by 4.5% on that timeline.

  • Most responses in this new survey for the euro area, Germany, and the United States show weakening month-to-month. Ten of the observations weaken month-to-month while six show strengthening. The variables that strengthened month-to-month were the assessment of the U.S. economic situation, economic expectations in Germany, and stock market expectations in the euro area, Germany, and the U.S. On the foreign exchange side, the dollar is expected to strengthen vs. the euro. We continue to see a weaker economic situation signaled in the euro area and in Germany. Economic expectations for the U.S. are weaker as economic expectations for Germany strengthen. The ZEW respondents are optimistic regarding inflation as they see it getting weaker in all three areas. As a result of this, short-term rate expectations are weaker in the euro area as well as in the U.S. Long-term interest rate expectations are weaker in Germany and in the U.S. And given that optimism on inflation behaving and interest rates falling, stock market expectations are stronger in all three areas.

  • Output in the European Monetary Union in July remains a mixed phenomenon. Among the thirteen early reporters of industrial production, six of them show output declines in July, after ten of them had declined in June and five of them declined in May. Over the last three months there has not been a majority of countries showing output declines across all three months but there certainly is a critical mass of countries showing declines and a good deal of unevenness in output in the European Monetary Union. Out of 39 months-to-month changes (13 countries over 3-months), 21 of them showed declines (53.8%). In July among the four largest economies (Germany, Italy, France, and Spain), three of them showed output declines; similarly, 3 of the largest economies posted declines in June; however, in May, all four of the largest monetary union economies logged increases in output.

    Sequential patterns: 12-months to 6-months to 3-months Sequential patterns in output are mixed. But looking at the diffusion index for the European Monetary Union overall in manufacturing, the three-month reading is below the six-month reading and the six-month reading is below the 12-month reading. The overarching view from the manufacturing PMI statistics is that there is ongoing weakness in the monetary union. Austria, Germany, Finland, Ireland, and Sweden (the latter not a monetary union member) each show declines in output over three months, six months and 12 months. The median for the monetary union overall shows a 2.1% decline over 12 months; output declines at a sharper 3.6% pace annualized over six months; that decline trims to a decline at a 1.3% annual rate over three months. The lesser decline in output over three months has a lot to do with a sharp 10.7% increase in output from Portugal, a 6.7% increase over three months in Spain, a 5.1% increase in the Netherlands, a 4.8% increase in Italy, and a 3.6% annual rate increase in France. Over three months there clearly is a collection of countries showing considerable strength. However, over three months Germany also shows a 9.5% annual rate decline, Austria logs a 7.9% annual rate decline, and some of the smaller countries post substantial negative numbers for output as well. Sweden, not a European Monetary Union member, logs a decline in output at a 12.6% annual rate over three months. Clearly, the monetary union and Europe are looking at relatively mixed conditions.

    Accelerating output trends are weak but improving We also calculate in the table the tendencies for output to accelerate in the euro area on a month-to-month basis; 53.8% of countries show accelerating output in July compared to June. However, in June only 7.7% accelerated relative to May. In May 61.5% of the respondents showed output accelerated relative to April. Over three months 45.5% of the countries are showing output accelerated relative to six-months; over six months only 38.5% are accelerating relative to 12-months and over 12 months only 27.3% are accelerating compared to one year ago. The sequential growth rates on acceleration show that acceleration is a phenomenon that occurs in fewer than 50% of the respondents over each horizon (from 3- to 6-months and from 6- to 12-months). However, the proportion of firms experiencing acceleration has been steadily increasing; over three months at 45.5% the proportion is getting much closer to the neutral mark at 50%.

    Quarter-to-date With July data, we have the first monthly observation in the third quarter. Quarter-to-date calculations look at the growth in July compounded over the second quarter average. The median for output in the second quarter in the monetary union is a decline of 3.2%; eight EMU member countries show negative numbers for output in the incipient third quarter with one-month’s data in hand.

    IP growth rate rankings Ranking the year-over-year growth rates for industrial production on data back to mid-2006, only two countries in the table have a rank standing above their historic median growth rate over this span. France has a 77-percentile standing, and Malta has a 55-percentile standing. However, among the other large EMU member countries, Germany has a 25.4 percentile standing, Italy has a 32.7 percentile standing, and Spain comes close to having a median standing at the 49.8% mark. The median standing across all EMU members is much weaker at 23.4%.

  • Japan's economy watchers index slipped to 53.6 in August from 54.4 in July. It's a small slip that still leaves the index with a very high queue standing at its 92nd percentile. The index is lower on balance over three-months, but it's higher over six months and higher by 8.1 points over 12 months. The month-to-month setback seems to be something of minor importance…but momentum is waning.

    The future index also slipped back to 51.4 in August from 54.1 in July. That index has a queue standing at its 75.9 percentile, still a firm-to-strong standing but not as strong as the current index. The future index is also weaker over three months and slightly stronger over six months and stronger over 12 months as well, but by just a small amount.

    Current index While the current index is lower on the month and it is a minor setback, all components were lower month-to-month except for retailing. There was substantial breadth to the step back in August small though it may be. Many components still have extremely strong rankings. For example, the household sector, retailing, eating & drinking establishments, and services all have queue percentile standings above the 90th percentile. A substantial portion of the economy is still quite strong nonmanufacturers as a group have an 86.6 percentile standing. However, housing has a below-median 39-percentile standing, corporations taken as a whole have a 78-percentile standing, manufacturers have a 64-percentile standing, employment overall has a 55.7 percentile standing not far above its historic median as the median occurs at a rank standing at the 50th percentile.

    Future index The future index shows weakness across the board with the headline and all components weaker in August than they were in July. The headline weakens and shows weaker components across the board for three months. Over six months three measures show declines: eating & drinking places, housing, and employment. The rankings in the future survey are generally strong but not as strong as for the current index. The future headline has a 75.9 percentile standing, households, retailing, eating & drinking places, and services all have rankings in their 80th percentile. Housing has the weakest standing at a 37.9 percentile, employment is below its median at a 47.4 percentile standing, corporations is at its 66.4 percentile, manufacturers are at their 60th percentile and nonmanufacturers overall are at their 76th percentile.

  • Germany
    | Sep 07 2023

    German IP Falls in July

    Industrial production in Germany fell again in July, although the pace of decline let up from June. Industrial production fell by 0.8% in July following a 1.4% decline in June and a 0.1% decline in May; industrial production has fallen for three months in a row and in four of the last five months. Manufacturing output accelerated its decline, falling by 1.8% in July after falling by 0.9% in June. Manufacturing production had risen by 0.2% in May.

    All three major sectors showed declines in output in July with consumer goods output falling by 1%, capital goods output falling by 2.9%, and intermediate goods output falling by 0.7%. This compares to June when only capital goods output fell, dropping by 3.3% while consumer goods output increased by 2.2% and immediate goods output edged ahead by 0.3%.

    Sequentially, however, output continues to weaken as the 12-month growth rate is -2.2%, the six-month pace is -5.4% and the 3-month pace is -9.1%. Manufacturing mimics these declines with a 1.5% decline in output over 12 months, a 4.5% annual rate decline over six months, and a 9.5% annual rate decline over three months.

    The construction sector drops in July, but it's sequential output path shows the deteriorating trend with construction output rising 0.8% over 12 months, falling at a 1.2% annual rate over six months and accelerating the decline to -3.5% annually over three months. Overall industry, manufacturing, and construction, deliver declining trends and declining trends that accelerate.

    Real manufacturing orders and real sales in manufacturing both fell in July. Real sales fell for the second consecutive month-to-month decline; however, both real manufacturing orders and real sales show positive growth and a pickup over three months compared to six months, failing to echo the accelerating downtrend that we see for output overall and for manufacturing and construction in the industrial production report.

    Industrial indicators for Germany show greater weakness in July compared to June for the ZEW current index, the IFO manufacturing index, IFO manufacturing expectations, and the EU Commission industrial index. The industrial indicators do not echo the decelerating trend from 12-months to six-months to three-months that we see for industrial output. However, each of these manufacturing measures is weaker over three months than it was over six months, indicating a greater move towards weakness over the last half year or so although not stretching the trend back to 12-months.

    There are some early output data available for Portugal and Norway in July. Portugal shows output increase in July while Norway shows a decline. Norway shows industrial output falling in June; however, both Portugal and Norway demonstrate output declines over 12 months and worse declines over six months. But that trend transitions into growth over three months. Portugal shows output growing at a 10.7% annual rate over three months while Norway barely eeks out any gains at all rising at a 0.3% annual rate.