Introducing

Robert Brusca

Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.

Publications by Robert Brusca

Japan| Jun 20 2025
Japan’s May Inflation Pressure; Inflation Makes a Second Run at Acceleration
Japan’s inflation measures excluding fresh food are showing significant pressure as the ‘all items ex fresh food’ metric soared at a 5.6% annual rate over 3 months while the measure excluding fresh food & energy rose at 3.7% pace over 3 months. The two gauges also rose by 3.7% and 3.3%, respectively, over a span of 12 months. The performance of the measure excluding fresh food & energy sequentially is plotted in the chart. It shows clear ongoing inflation pressure and acceleration.

This, of course, puts the Bank of Japan in a difficult position. Midyear elections are in prospect and sharp rise in rates could prove politically intrusive. At the same time, Japan’s largest trading partner, China, is struggling and its second largest trading parting, the United States, is embroiled in negotiations with Japan over tariffs. There is a great deal of uncertainty for Japan right now surrounding the policy process and that includes a large dose of geopolitical issues.

At the same time, there has been a kerfuffle in Japan’s bond market in the super-long end as purchaser demand has proved less solid and less stable than it was. The BOJ has had a scheduled taper of its purchases in place, one that the BOJ at its last meeting agreed to reduce in order to retain better demand in the long end of the JGB market. However, Japan does face some uncertain times for policy.

The inflation metrics with fresh food show the strongest growth rates for inflation. A traditional core measure that subtracts all food and energy shows less pressure at only 1.5% over 12 months, compared to core readings of 3.3% and 3.7% for the core measures that subtract out fresh food.

Looking across components, among the eight major categories only two have inflation easing over 12 months compared to 12-months ago; those two are ‘education’ where inflation is - and prices- are falling sharply, and ‘reading and recreation’ where inflation is at 2.9% but lower than it was 12-months ago. Over 6 months, only two of five categories show inflation acceleration (compared to the 12-month pace) and the 3-month annualized inflation across categories shows acceleration in half and deceleration in half compared to the paces over 6 months. Only education shows sequential deceleration – where the fall off is sharp. Only housing shows sequential acceleration, and the ramp up there is more moderate.

QTD (quarter-to-date) Quarter-to-data inflation (May & April over the Q1 average then compounded) shows a headline pace at 2%; ‘all items ex fresh food’ inflation is at a 4.7% pace; ‘all items ex fresh food & energy’ is at 3.3%, while the traditional core ‘excluding all food & energy’ is at 1.4%. So, again, we see on the QTD horizon the measures with fresh food subtracted – the BOJ’s preferred gauges- are showing the most pressure. By component, QTD pressure is lodged in ‘reading & recreation’ and in ‘transportation & communication;’ and ‘housing’ (without subtractions) flies below the 2% target at 1.8%.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Jun 18 2025
U.K. Inflation Moderates
Inflation in the United Kingdom measured by the CPI-H measure rose by 0.1% in May as the core excluding energy, food, alcohol, and tobacco also decelerated by increasing 0.1% on the month. These slower May increases follow accelerated increases in April for both the headline and core and more modest increases in March. The sequential growth rates in the headline CPI-H show a gain of 4% over 12 months, a rise at a 4.3% annual rate over 6 months, and a 3.4% annual rate rise over 3 months. The core for the CPI-H shows a 4.2% increase over 12 months, a 4.1% annual rate increase over 6 months and another slight deceleration to 3.6% at an annual rate over 3 months. These data for the headline and the core both show that U.K. inflation has plateaued and begun to edge lower; however, the deceleration is quite slight for both the headline and for the core measures.

Inflation diffusion that measures the breadth of inflation shows a reading of 54.5% over both 12 months and 6 months, with 3-month diffusion much lower at 36.4%. Diffusion readings of 50% show inflation accelerating and decelerating with equal tendencies from period-to-period. Diffusion above 50% shows more accelerating inflation while diffusion below 50% finds more deceleration for inflation. Diffusion readings show that for 3-months compared to 6-months diffusion is significantly lower but that diffusion over 6 months (compared to 12-months) and for 12-months (compared to 12-months ago) is slightly accelerating.

The HICP measure parallels the results for the headline CPI-H with a slight inflation bulge over 6 months and significant slowing of inflation over 3 months. The agreement across the headline, and core CPI-H measures compared to the HICP is reassuring that these trends are true and not simply mercurial or the results of a particular inflation weighting scheme (since CPI-H and HICP use different weights).

Meanwhile unemployment in the U.K. has risen only slightly over the past 12 to 24 months. The recent U.K. monthly GDP reading showed a sharp slowing, but year-over-year growth is still positive headline.

The sequential chart that depicts the growth rates sequentially for timeseries of 3-month, 6-month and 12-month inflation (above) shows that part from a one month slice of those rates (which is what the table provides) the timeseries reveal that the tendency for inflation peaked across these three frequencies back in January and has since been reduced to its lowest pace since October 2024 for both 6-month and 12-month CPI-H core inflation. For the 3-month version, inflation at 3.6% is the slowest since January 2024. Three-month core inflation has slowed without increasing for four months in a row as has 12-month core inflation.
by:Robert Brusca
|in:Economy in Brief
Germany| Jun 17 2025
Germany’s ZEW Survey Respondents Improve Their Assessments
Economic situation- The ZEW index for June 2025 showed significant improvement in the euro area with the index moving up to -30.7 from -42.4 in May. At that level, the queue percentile standing on data back to 1992 is at its 47.5 percentile, close to its median for the period (median occurs at a ranking of 50%). For Germany, there was an improvement from -82 in May to -72 in June; this sets its standing at about its 20th percentile, much weaker than for the euro area overall. For the United States, there was a more modest improvement in June to -17.3 from May’s -25.4; June marks a 25.8 percentile standing, roughly in the lower quartile of its historic queue of data over the last 13 years. Economic assessments for these three reporters range from quite weak to just slightly below ‘normal.’

Macro-expectations- Macroeconomic expectations became sharply stronger for Germany in June; they moved up to a +47.5 reading in June from +25.2 in May, a reading that already had improved from -14 in April. Germany is on a very hot run in terms of expectations that are improving at a much faster pace than the current economic situation. Germany’s macroeconomic expectations have a 72-percentile standing, in the top 30% of their historic queue of data, quite a solid result. This contrasts sharply with the United States where there was also an improvement in June to -41.9 from -48.2 in May. The U.S., like Germany, had undergone a substantial improvement in May compared to April since April's reading had been -71.5. However, the June reading for the U.S. improved month-to-month by only a modest amount and has only an 8.5 percentile standing, the lower 10% of its historic queue of data.

Inflation expectations- Inflation expectations remain weak in the euro area and in Germany in June while they've grown to be quite strong in the United States. Germany saw slight increases in inflation expectations in the month, but they are still at weak levels and the 20- to 25-percentile region on a queue-standing basis. For the U.S., inflation expectations have cooled slightly from a reading of 75.8 in April to 70.7 in May, to 60 in June, a clear de-escalation of inflation expectations; however, still leaving a high 81.1 percentile standing for inflation expectations in the U.S.

Short-term rate expectations- Short-term interest rate expectations in the euro area rose after falling back in May; in the U.S., they edged only slightly higher after also having stepped back in May. However, both the U.S. and the euro area have extremely weak queue standings, both of them in the lower 15-percentile of their respective ranges. Short-term interest rates simply are not expected to rise, and they obviously are more likely to be cut on readings like these.

Long-term rate expectations- Long-term expectations for Germany and the United States show German expectations have waffled, moving from 23.3 in April, down to 6.9 in May and bouncing back to 16.8 in June to produce a queue standing in its 22nd percentile. In the U.S., long-term rate expectations were at 48.5 in April; they fell to 32.1 in May and rebounded to 39.0 in June to reach a queue standing at its 43.6 percentile, slightly below its median standing for the period (remember that median standings occur at a queue percentile standing of 50%).

Stock market outlooks remain weak- Stock market expectations show weak standings everywhere. The euro area saw a marginal technical improvement in June compared to May; Germany saw a small improvement in June compared to May, whereas May had seen a more significant increase compared to April. The U.S. continues to log negative readings for equities. Germany and the euro area show standings for the stock market in their respective 15-percentile ranges, whereas the United States’ reading is in its 7th percentile. All of those readings are weak.
by:Robert Brusca
|in:Economy in Brief
Japan| Jun 12 2025
Japan’s MOF Business Outlook Survey- A Step back But with Optimism
The outlook survey Japan's Ministry of Finance business outlook survey for business conditions among large enterprises registered a decline in the second quarter, posting a -1.9 reading in the current quarter compared to 2.0 in the first quarter and 5.7 in the fourth quarter of 2024. Manufacturing enterprises registered even weaker results with a -4.8 reading in the second quarter, down from -2.4 in the first quarter and compared to +6.3 in the fourth quarter. Even nonmanufacturers in the second quarter logged a negative response at -0.5, compared to +4.1 in the first quarter and +5.4 in the fourth quarter of 2024. These are all responses from large enterprises.

The survey also covers medium and small enterprises; both medium and small enterprises showed negative figures for the second-quarter business conditions. For medium enterprises, the drop was to -0.9 from +0.7 in the first quarter and +3.8 in the fourth quarter. Whereas medium-sized enterprises showed less change with a -12.3 response for the second quarter compared to -12.7 in the first quarter and -4.7 in the fourth quarter. Small enterprises seem to be facing difficulty.

General conditions for the domestic economy in the survey for large enterprises showed a fall off to -6.2 in the second quarter from +3.1 in the first quarter and +4.2 in the fourth quarter. Drop offs were apparent for manufacturing and for nonmanufacturing establishments. Medium-term enterprises showed a similar and sharper drop off and small enterprises saw weakening worsening with the overall negative numbers being posted for the second quarter even weaker than what they registered under business conditions.

On the employment side, large enterprises posted a 26.9 reading in the second quarter, a decrease from the first quarter reading of 28.3, compared to a fourth quarter reading of 27.4. Manufacturers showed flat employment responses; nonmanufacturing enterprises showed weakening responses. Medium and small enterprises both show a pattern of weakening.

The Outlook In addition to the current quarter responses, there are also one- and two-quarter-ahead outlooks provided by the survey. Business conditions for large companies post a +1.5 reading for the quarter ahead and +2.6 for the quarter after that. For medium-sized enterprises, they see a +3.1 reading for the quarter ahead and +3.3 for the quarter after that. Small enterprises log a -5.1 reading for the quarter ahead and -3.8 for the quarter after that.

The readings for the general domestic economy are generally higher than for business conditions for large enterprises. In all cases, the net readings for the general domestic economy for the quarters ahead are better than the assessment for the current quarter (2025-Q2).

One significant caveat here is that the outlook quarter for employment generally shows weaker net readings for the future quarters than for the current quarter -and this is true across the board.

Rankings To understand these assessments better we can look at them as rankings, ranked against their own past responses. The rank standings of the various data across the industry types and various sizes of companies for business conditions shows generally stronger rankings for medium and smaller enterprises than for large ones for the current quarter. Large and medium-sized firms see erosion in conditions looking ahead and farther ahead. But small nonmanufacturing enterprises see conditions firming ahead compared to past responses on this survey.

General domestic economic assessments show weak rankings across the board all below their 50-percentile mark in standing, but all also show improving trends in ranking looking ahead. But the response for small manufacturers even though they obey these same trends, they are extremely weak.

The job market assessments show a rank assessment of 80- and 90- percentile standings across most firms regardless of firm size; the exception is for medium and small manufacturers. But even there while their current quarter standings are below 80%, their outlook remains solid even with a current quarter ranking as low as 41%, small manufacturers get their two quarter ahead employment expectations up into the 80th percentile.
by:Robert Brusca
|in:Economy in Brief
Japan| Jun 11 2025
Japan’s PPI Shows Inflation Slowing
Japan’s PPI in April edged higher, rising by 0.1% month-to-month. For all manufacturing, the PPI stepped back and declined by 0.4% month-to-month. Both of these follow stronger increases in the previous months.

Still, these headline PPI shows a gain of 4.1% over 12 months, an expansion pace of 3.9% annualized over six months and a gain over three months at an annual rate of 3.6%, a steady, but moderate, deceleration for inflation.

Manufacturing prices rose by 2.3% over 12 months and accelerated slightly to an annualized pace of 2.6% over six months before slipping into low gear and rising at just a 1.6% annual rate over three months.

Japan’s CPI also decelerates on this sequential timeline, but with a hump in the middle after accelerating over six months. The U.S. PPI has that same profile. Japan’s core exhibits barebones deceleration; after rising at a 1.6% annual rate over 12 months, it settled into a gain of 1.5% annualized over both three months and six months. Producer prices in the EMU show ongoing declines with a lesser decline over six months, then, a greater pace of decline over three months, at -5.5%.

These comparisons reveal a rather broad-based trend for inflation to ease and weaken, especially over the recent three months.

A big part of inflation going weak over three months is oil prices. Oil prices (Brent) fell by 17.9% in April. They also fell at a 54.4% annual rate over three months, a 25.2% pace over six months, and at 28.2% over 12 months. Falling energy prices, especially if they fall long enough and sharply enough, get into the pricing system and have an impact beyond headline prices. We are seeing that on global basis, right now.

U.S. and EMU PPIs as well as Japan’s PPI and manufacturing prices all show positive correlations ranging from 0.37 to 0.53 with Brent prices with both series expressed as year-on-year percentage changes. Japanese CPI prices, however, show negative correlations between energy prices and headline core inflation rates, -0.15 to -0.37.

One month in the second quarter data show U.S. and PPIs revealing declines in prices along with Japan’s manufacturing price index. In this nascent quarter, Brent prices are edging lower at a 0.2% annualized rate. Still, Japan’s CPI is rising at a 1.4% annual rate and the core at a 1.7% annual rate as Japan’s CPI continues to resist the siren call of lower prices from the Brent index.
by:Robert Brusca
|in:Economy in Brief
Australia| Jun 10 2025
National Australia Bank Survey – One Month Glimmer
The National Australia Bank (NAB) index rose in May after three straight months of declining breaking a string of weakness. However, sequential changes still show declines on balance over 12 months, six months and three months. The level of the current index ranks only in its 32.6 percentile on data back to early 2003. The ranking of the three-month moving average is in its 17.6 percentile and for the 12-month moving average the ranking is in its 20th percentile. The index clearly is weak and it has been weak for a while; however, forward orders suggest that there may be some improvement in train, although that reading too remains with a weak, though improving, ranking.

Bad breadth... The indexes and the components of the Australian index show broad based weakness over three months, six months and 12 months. Over recent months proving characteristics have shifted to be slightly more positive. As in March, 68.8% of the categories showed improvement month-to-month, in April only 18.8% showed monthly improvement while in May over 60% showed improvement. However, the monthly data are in sharp contrast to the sequential data where three-month trends show only 18.8% of the categories improving, only 37.5% improving over six months, and compared to a year ago only 25% are improving. So, the Australian index definitely chronicles a lot more weakness in train despite the fact there may be some hints of improvement or, at least, less weakness, creeping in.

Weak, in a long historic context as well Among the 13 categories in the index, there are only six of them that have queue percentile standings above the 50% mark, a level that indicates they're above their historic medians; three of those firmer observations signal excessive price pressures coming from labor costs, purchase costs, and prices-outright. Interestingly, Australia continues to show exports and export sales as above median despite the hostile global environment with tariffs rising and trade wars threatening Australia also shows an above median reading for capacity utilization.

On balance, the report is not very reassuring although there is an increase in the overall index in May and there are slightly weaker decelerations in the three-month and 12-month moving averages, but those are more cases of less weakness in train than evidence of any outright improvement occurring. The NAB index continues to be a downbeat reading on the Australian business situation although the resilience in the export categories is something of note.
by:Robert Brusca
|in:Economy in Brief
Japan| Jun 09 2025
Economy Watchers See a Glow of Improvement- But Not Much Growth
The economy watchers readings improved broadly, rising month-to-month across 70% of categories in the current index and across all categories in the future index. In sharp contrast, all the current and future readings are lower year-over-year and most of them are lower over six months- all are lower on a six-month average basis- as well as over three months compared to six months.

The month’s strength is widespread as one-month phenomenon, but it clearly comes amid a period when growth has been relentlessly weak. It is not clear that the one-month signal is strong enough to dominate the weak trend.

The levels of the readings are clearly and broadly weak. No future index has a ranking above the 50-percentile mark (above its median) and only one current reading -housing- is above its median, but that is only barely and only for a month and not an average basis.

The future indexes are relatively stronger for corporations, both manufacturing sector and in the nonmanufacturing sector, as well as for eating and drinking places. The services sector has the lowest ratio of the future reading ratio to the current reading.

Despite the ‘pop’ in the reading for this month, the report is hardly upbeat. Japan’s economy seems locked in a weak trend with the current month showing a sigh of life. The question is whether this signal is real and lasting or not. We can’t know that yet.
by:Robert Brusca
|in:Economy in Brief
Germany| Jun 06 2025
German IP Slips
German industrial production (headline series including construction) fell by 1.4% month-to-month in April as a recent see-saw pattern of monthly increases vs. declines is in train back to October. Output declines in the month were distributed across consumer goods, capital goods and intermediate goods.

In addition, construction output fell in April, dropping by 1.5% month-to-month after rising in March and declining in February.

Manufacturing output fell by 1.8% month-to-month in April as real sales also fell by 1.5%, and as real orders for manufactured goods rose in the month by 0.6%.

Sequential trends The sequential trends for IP and its various sectors as well as for orders show unclear trends. Capital goods and intermediate goods show improving trends (from 12-months to 6-months, to 3-months) as output transitions from declines over longer periods to increases over the recent shorter periods. Manufacturing joins that sequence as it also shows a transition from a period of declining output to increases in recent periods. But construction trends remain erratic and the trend for real orders is also chaotic, although it is topped up by a very strong gain over three months. Real sales are on board for the transitional move from declines to sales increases over recent periods. While there is some degree of mixed trends in the data, there are also some traces of an ongoing recovery with improvement in progress. It is still nascent, but the improvement is identifiable and easily recognizable.

Surveys Manufacturing surveys from ZEW, the IFO, and the EU Commission are mixed in their message. The ZEW survey shows a sharp improvement month-to-month. The IFO shows weakening for manufacturing and for manufacturing expectations. The EU commission index shows an improvement month-to-month. Compared to February levels, these same four readings show contrary results. Their sequential signals remain mixed, both in terms of their lack of monotonic signaling as well as in terms of the simpler comparison of the 12-month readings to the 3-month readings. There is simply no clear signal on direction here.

Other Europe Portugal and Norway offer two separate Northern- and South-European signals; both show strongly improving sequential trends. Their month’s performance remains chaotic, but their sequential performance is upward and a clear positive signal.

QTD Quarter-to-date signals (QTD) show mixed results for output-based measures and for real orders in Germany. But the survey data show improvement QTD and the two European readings for Portugal and Norway show gains in progress as well.

Queue standing The queue standing data that ranked performance over a longer profile show most readings with rankings below the 50% mark which in all cases leaves the current reading below its median for this period (data back to 2000), the exceptions with above 50-percentile readings are consumer goods in Germany (54.6%), real manufacturing orders in Germany (66.7%), and Norway (99.6%).

Summing up Despite the month’s step back, there is still evidence that growth and improvement is stirring or trying to stir. Economic performance often is not monotonic and various factors including weather and other unique and temporary factors can interrupt even a solid trend. There is reason to be hopeful that German data still show progress and with the mandate to do more to defend themselves in NATO is also a spur to output we should expect over the coming months.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 05 2025
Composite PMIs Show Some Life- But Still Near Death
The global PMIs for May continue to show a good deal of stability but at relatively weak levels of performance.

There is, in the May report, some difficulty in assessing performance in what always will be a large sample of countries. Here we're looking at 25 countries and each country reports initially 3 values, one for manufacturing, one for services and then a composite reading (a few do only report a composite). In this table, we're looking only at the combined composite reading which as a weighted reading emphasizes the service sector more than the manufacturing sector. Service sectors have come under pressure and at the same time there's been a lot more concern about manufacturing because of tariff policy and because of international sanctions that have been placed on pariah countries particularly Russia for its attack and its ongoing war against Ukraine. There is concern about manufacturing output and trade which is a factor more for goods than for services.

However, it now appears that this long grinding pressure against the goods sector has spilled over into the service sector and that service sectors are behaving much more erratically and performing at lower levels of activity. However, there's a complicated relationship involving goods sectors because U.S. tariff policy that has threatened global trade patterns and possibly the volume of global trade itself. This has also created a situation that has generated leads and lags that may have stimulated manufacturing sectors over the last few months as manufacturers have tried to pump out goods and shove them into countries ahead of expected there are barriers. Tariffs may have provided stimulus.

The initial draconian tariff barriers indicated by the U.S. were largely put into an abeyance, however the U.S. has a more modest 10% tariff in place and more recently a much larger set of tariffs has been imposed on steel and aluminum. I don’t know what ash changed to make U.S. steel a darling of U.S. industry because when I first studied economics back in the 1960s U.S. steel was then a laughingstock of excesses and competitiveness. It may now be the George Floyd poster-boy of U.S. industry.

The United States and China had a certain tariff detente that seemed to be in place; however, it now appears to be challenged. China has been denying access to rare earth exports not just to the U.S. but to European firms as well. This has generated a backlash from the U.S. and a claim that China has not been fairly administering the detente that had been agreed to. In response, China claims that the U.S. was not adhering to policies and among other things pointed to the recent U.S. policy of canceling Chinese student visas to study in the United States. However, in the last day or so, there has been a telephone call between President Trump and Prime Minister Xi and we'll have to see if that leads to any change in these circumstances. Most recently, Donald Trump, who considers himself a skilled negotiator, has said that Xi is a very difficult person to negotiate with. Trump also has run into difficulties with his negotiations with Vladimir Putin who seems to continue to shine on Mr. Trump and then to do none of the things that he promised Trump he would do. So, reality bites.

The comprehensive PMI data show the unweighted average that is just slightly weaker in May than in April; the median is also slightly weaker in May than in April; however, the G7 GDP-weighted reading is higher in May at 51.5 compared to 49.9 in April and the G6 weighting which excludes the U.S. finds an improvement to 49.2 in May compared to 48.9 in April. On a GDP-weighted basis, there does appear to be some progress that might be occurring, but overall based on the unweighted averages and looking at various groupings of countries there still seem to be severe challenges based on the assessments of the PMI.

In addition, the rankings that are presented show that very few of these 25 reporting countries have current readings that are above their medians of the last 4 1/2 years. Only 6 of 25 countries show current ratings that are above their historic medians; among those, Italy is the only large-economy country that's above its median.

The chart plotted for this presentation shows a great deal of confusion in terms of where these various aggregated sector trends are going. The services and the composite indexes are still clearly trending lower, setting aside their particular movements in the last couple of months. Manufacturing that has weaker readings overall, show some life, but some of this may be generated by the leads-and-lags of the tariff process.

Manufacturing may be turning higher on the need for Europe to provide more of its own defense. This requirement should stimulate the manufacturing sector in Europe in the months and years ahead as the U.S. is going to be relying on Europe to provide more of its own security. However, over the long run, spending more money on military goods doesn't seem to be a good way to improve global welfare. We have benefited in recent years from a long period of political stability and demilitarization, but now it looks like that peace dividend is gone and at least there will be some increase in output from the goods sector as a result. But it's hard to paint that overall as a good development.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 03 2025
Unemployment Falls Despite Myriad Tensions
European unemployment is very well-behaved Despite well publicized threats from all corners and all sorts of uncertainty, the unemployment rate in the European Monetary Union (EMU) ticked down to 6.2% in April from 6.3% in March, tying it for its lowest rate since the formation of the monetary union itself. In the broader Economic Union, the unemployment rate remained at 5.9% now; it's just a tick above its low point on the same timeline.

Unemployment remains low Over 12 months the EU unemployment has fallen by 0.1% while the European Monetary Union (EMU) unemployment rate has fallen by 0.2%. This is a period in which the situation in the Middle East has remained hot, the Russia-Ukraine war has dragged on despite efforts by Donald Trump to try to bring both participants in that conflict to the table to talk and to get a negotiated peace, even more prominently, during this time, the United States has been threatening tariffs! Economists have been looking for all kinds of bad things to happen but instead the unemployment rate continues to drop and inflation rates in the United States and in Europe have continued to edge slightly lower.

Are economic concerns overblown? I'm not going to claim that the economic concerns about uncertainty are completely unfounded or that we're not going to have some difficult economic times over tariffs eventually. But the decision by economists to ramp up concerns about uncertainty and how terrible uncertainty is, and how bad it's going to be for our economies, does not seem to be bearing fruit. Economics has moved from the notion that income and prices matter to the notion that income expectations and price expectations matter. We ae now firmly in the land of perceptions and expectations- but maybe we should also keep one foot in the land of reality - the Church of what’s Happenin’ now, as Flip Wilson Once called it in his comedy routine. We're in a period where there's very little going on in terms of policy change, but there's a lot that we expect to happen moving forward although we're not sure precisely what it is. There are concerns about how the tariff negotiations will work out and if there's going to be a trade war; certainly if our countries cannot civilly adjudicate their differences, a trade war will be very bad for the participants. But so far, all the gnashing of teeth about the impact of uncertainty is at the very least whistling past the graveyard.

Ongoing excellent performance Unemployment rates in the European Monetary Union in April fell in seven of the 12 reporting monetary union countries in the table. In March, unemployment rates fell in only one country, in Luxembourg. In February, unemployment rates fell in five of the 12 countries. Over three months, there were unemployment rate declines in five countries with unemployment unchanged in two. Over six months, unemployment rates fell in six countries and unemployment rates were unchanged in two. Over 12 months, unemployment rates fell in six countries. The declines over these broader periods of time seemed to be still, consistently in force.

Strong historic comparisons If we look at the levels of the unemployment rates evaluated since 1994, we find only three monetary union members with unemployment rates above their historic medians in this period. The exceptions are Luxembourg, Finland, and Austria. Including the countries at the bottom of the table that are not monetary union members, the United Kingdom (based on its claimant rate) is also above its historic median. Japan's rate is in its lower 12th percentile and the U.S. is in its lower 25th percentile. EU and EMU rates each rank within their lower five percentile! Altogether, it’s an impressive performance. Look at it. Read the economic/Financial press. Connect the dots- if that is at all possible.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 02 2025
Little Change Logged for Flash PMIs in May
The months readings are decidedly mixed. Four service sectors report stronger month-to-month and four weaker; manufacturing sectors report three weaker and five stronger. The composite headlines are split four-and-four.

Still, it’s not as if nothing is happening. On data back to January 2021, the average of the composite ranked in May has a 35-percentile standing – still below its median on the period. Services have slipped with a 28-percentile ranking well into the bottom one-third ranking position. Manufacturing has been rehabilitating despite the Russia-Ukraine war and the Trump tariffs, as the sector has an above median 60.4 ranking on its average reading.

On an individual country basis, the EMU, Germany, France, the United States, Australia, and India – all reporting countries except the United Kingdom and Japan show manufacturing PMI rank standings above their respective medians (above a ranking of 50%). But only Japan and India show service sectors with rankings above their respective medians and only India has a composite standing above its median on this timeline. And India is an exception with extremely high rankings across sectors.

The monthly average shows very little change from March to April to May. The composite and services readings get slightly weaker while manufacturing gets marginally stronger moving up from 49.9 in March to 50.5 in May- hardly a rocket shot. Similarly, there is little change from the 12- month to six-month to 3-month averages. Looking at 3-months to 12-months, the composite weakens from 51.6 to 51.2, manufacturing improves from 48.8 to 49.6 and services weaken from 52.4 to 51.3.

There is a great deal of grumbling about policy and U.S. tariff threats, but so far there is little evidence of impact. I’m sure there will be impact, but I am not as persuaded that ‘uncertainty’ ‘per se’ is the bogeyman everyone else wants to make it out to be. It can be an issue. But I expect Trump to resolve these issues so that the main impact I expect is the impact from the deals he makes.
by:Robert Brusca
|in:Economy in Brief
Global| May 30 2025
Global Monetary REFLATION
Global monetary reflation is once again underway. The United States, the European Monetary Union, and the United Kingdom are all our participants; Japan is the country going its own way continuing to tighten and to restrict policy through disciplined and tightening monetary growth.

Reflation afoot Among the other three countries that are showing monetary stimulus, the U.K. is leading the way with the sterling M4 growth rate up to 7.6% at an annual rate over three months. The U.K. data lag other data in the table; they're not up to date through April; still, the acceleration is quite apparent over three months. Over 12 months, U.K. money growth is 3.5%, U.S. money growth is 4.4%, and the European Monetary Union money growth rate is 3.6%. The annual numbers still represent reflation increases in the annual growth rates compared to where they have been in the last three years, although none of the year-over-year growth rates really look like they are yet excessive compared to inflation targeting plans and likely GDP growth rates. However, this is definitely a transition to reflation. The question is whether it will be tempered at the right point.

EMU trends In the European Monetary Union, the two-year growth rate and the three-year growth rates for money are under 2% while the 12-month growth rate is up to 3.6%. Monetary Union growth rate of real money balances is up over three months at 2.3% at an annual rate and at 1.5% over 12 months. European credit growth is picking up, as well, with private credit growth running at a 2.5% annual rate over three months and at a 2.3% pace over 12 months; in real terms, private credit growth year-over-year, however, is only 0.2%.

U.S. trends In the United States, money growth is up to 6.5% at an annual rate over three months, money growth has progressed from averaging 0.2% over three years, to 2.7% over 2 years, and now to 4.4% over 12 months. U.S. nominal money growth clearly is accelerating. Looking at the growth of real balances in the U.S., the real money stock is growing at a 4.9% annual rate over three months and at 2.1% at an annual rate over 12 months.

U.K. trends In the United Kingdom, there is that 7.6% three-month growth rate that compares to 3.5% over 12 months and to slower growth over 2 and 3 years. Real balance money growth is at a 3.3% annual rate over three months; over 12 months, the U.K. growth rate for real money balances is flat! While the U.K. seems to be in a period of relatively sharp acceleration for money growth, it's not yet a long-lived period of expansion, and so that has not yet had much impact on actual inflation developments. But the jack-rabbit start to monetary acceleration is something to be wary of.

Japan trends In Japan, M2 plus CD's is falling at a 2% annual rate over three months, and rising at only a 0.4% in an annual rate over 12 months. That represents a lower growth rate than its two-year or three-year growth rate for the money stock. In terms of real money balances, over three months Japan's real balances are shrinking at a 3% annual rate, the same as the 12-month growth rate. Japan clearly is using monetary policy to squeeze inflation lower.

Oil Disinflation efforts have been helped everywhere by oil prices that are falling in dollar terms at a 48.3% annual rate over three months and falling at a 24.6% annual rate over 12 months.
by:Robert Brusca
|in:Economy in Brief