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 new data today from Japan are for orders and these are presented at the bottom of this table. Total orders fell by 3.6% in April with core orders (those being the series excludes large projects such as ships and electric power plants) falling by 2.9% month-to-month. Foreign demand was the only category that rose on the month, it was up by 21.6% but that's following the only decline from March when foreign orders fell by 9.4%. Domestic demand fell by 15.1% in April.

    The ranking of the levels of the indices for orders are relatively high with core orders being the weakest at 85.8 percentile standing the rest having standings above the 90th percentile. However, over time and with inflation orders should grow so it might be more meaningful to look at the growth rank and on that basis core orders have a 44.8 percentile standing the growth rate rank, below its median - the median for ranking statistics occurs at the 50th percentile. However, in terms of growth rankings total orders, foreign demand, and domestic demand, all have standings from the mid-70th to low-80th percentiles which are quite solid metrics.

    Beyond Orders Other metrics in the table also assess the performance of Japan's economy in various ways. The first block in the table considers the economy watchers’ index. These diffusion indices are largely below scores of 50, indicating contraction for these survey items. In terms of rankings, the growth ranking for the economy watcher components are all quite weak - all below their 28th percentile in terms of levels- and these are more meaningful since these are diffusion indices. Eating and drinking and service sector indices have standings above their 50th percentile, but the rest are below the 50th percentile indicating performance for these sectors below their respective historic medians.

    The Teikoku surveys also employ diffusion indices. They are slightly weaker in their diffusion values than the economy watchers’ numbers. The rankings of the Teikoku diffusion indices in terms of index levels are all over the map, with manufacturing extremely weak, at a 35-percentile standing, and services at the other extreme, strong with an 80.7 percentile standing. In terms of the growth rankings all of them are weak with construction as high as a 38-percentile standing but after that nothing as high as a 32nd percentile standing.

    The METI tertiary index moved up in April to 101.9 from 100 in March. It has an index standing at its 85th percentile and growth standing at its 66th percentile, both above their medians. For industry we use the industrial production index which dips in April compared to March. It has an index rank that's low at 6.8% and a growth rank that's only at 12.8%. The weakness in industrial production reinforces the weak reading we see on manufacturing in the Teikoku survey.

    Japan's leading economic index in April ticks down slightly to 111.6 from a 111.7; that index has a ranking on its level at its 59th percentile and a growth ranking at its 74th percentile both mildly firm entries.

    Against the background of the surveys in the table, the orders responses in April show standing growth rates and order index levels that seem relatively stronger than some of the responses from the surveys in the table above. However, there's little indication according to any metric in the table there's much strength in Japan's economy, in the manufacturing sector, or across the service sector entries. The far-right hand column simply looks at changes in the various indices from January of 2020 when COVID struck. Recognizing that these are changes over a four-year period, they indicate a good deal of weakness across the Japanese economy. Against that background the orders data have better responses than the surveys.

    Still, the bottom line for Japan is that the economy is struggling, and the Bank of Japan is still trying to feel its way with policy being somewhat hesitant to raise rates too much despite excess of inflation because it's unsure whether the inflation is going to stay; the BOJ is still being very mindful of the long period of deflation it hopes it has put behind it. The sharp weakness in the yen that has developed this year is simply another policy challenge for the Bank of Japan and so far, this yen weakness has not particularly ignited either domestic growth or domestic inflation. But it has contributed to the increase in the price of energy and that has created some consumer distress.

  • Industrial output in Japan foundered drooping by 1.2% in April, with manufacturing output declining by 0.9% on declines spanning consumer goods, intermediate goods, and investment goods. Mining and electric and gas output fell in the month as well. Declines spread across all of manufacturing and all the major industrial production sectors. The textile industry managed a month-to-month rise.

    In recent months manufacturing output and overall industrial output have both been up and down by month. Sequentially, output may have broken out from a weak trend. Over 12 months output fell by 4%, over 6-months it fell at a 7.3% annual rate, but over 3-months overall output is up and 11.5% annual rate, a strong showing. Manufacturing output fell by 4.3% over 12-months, it fell at the 6.8% annual rate over 6-months and then surged at an 11.9% annual rate over 3-months. And while these patterns are encouraging, the impact on year-over-year growth has only been to stabilize output at around the -4% mark of contraction.

    By sector, consumer goods output continues to be weak but has trend with some of its weakness back. Consumer goods output falls by 4% / 12 months falls at a stepped-up pace of 8.3% at an annual rate over six months but then reduces its decline to less than 1% than an annual rate over three months. Intermediate goods output falls 4.8% / 12 months and follows at a 10.2% annual rate over six months but then manages to log an increase at a 0.4% annual rate over three months - that marks more of a reversal of trend than it does signal much of A gain. Investment could output falls by 3.9% / 12 months improve slightly by falling at only a 2.4% annual rate over six months and then jumped to a 24.2% annual rate gain over three months, that's a clear sequence of improvement but with most of the improvement coming over three months.

    Outside of manufacturing, mining output showed a similar pattern. Mining output fell by 4.4% over 12-months, fell by 6.8% at an annual rate over 6-months, and then logged a 9.1% rate increase over 3-months.

    Electric and gas output logs increased over all horizons and showed steady improvement over the sequential periods, rising by 0.8% over 12-months, rising at a 1% annual rate over 6-months, and then at a much-stronger 8.6% annual rate over 3-months.

    There's significant agreement across the manufacturing categories and other industrial categories that show that over 3-months something positive is stirring in Japan's economy; but, as yet it's not enough to dominate the existing declining 12-month trend.

    In the quarter industrial output is increasing at a9.9% at an annual rate, manufacturing output increases an 11.2% annual rate. However, the manufacturing result is driven by investment goods that are rising at a 30% annual rate in the quarter while consumer goods output falls by 3.6% at an annual rate and intermediate goods output falls at a 0.8% annual rate.

    Mining and electric and gas output both fall in the quarter to date, as well. But now the quarter is in a nascent phase with only one month of data in. Results for the quarter can still change quite markedly as there are still two-months-worth of data plus the potential for revision to reveal themselves. The quarter to date growth calculation involves taking the current month and calculating its trajectory over the first quarter average by compounding it; that tends to exaggerate its impact so early in the quarter. That will change significantly when the next several months of data are added in to complete the quarter.

    Output overall as well as manufacturing and all its sectors show output levels are still below what they were in January of 2020 when COVID first struck the world economy. The short-falls are significant, indicating that after four years Japan's economy still has not recovered from that body blow. The only industry that has improved relative to January 2020 is electric and gas and that's only because there's always a steady need for the output from utilities. This report highlights the potential for recovery in Japan's economy. Most of the gain stems from a revival in March, April's contribution is that it wasn't weak enough to wipe out the March gain. Still, the year-over-year change in output remains negative. Quarter to date output is stepping into positive territory but on the on the strength of one sector. Japan's economy still has a long way to go to put itself back on two feet.

  • Industrial production in the European monetary area fell by 0.1% in April after climbing by 0.5% in March and 0.1% in February. For manufacturing the April fall was greater at -0.4% although March had posted a gain of 1% and February’s gain is 0.8%. Uptrends are still intact for the headline excluding production as well as for manufacturing.

    Sequential growth rates for overall industrial production excluding construction show a decline at a 2.9% annual rate over 12-months, a gain of 0.2% at an annual rate over six-months and the three-month rise of 2.1% at an annual rate - a progression showing improvement for manufacturing. The manufacturing drop is also 2.9% over 12-months, the six-month rise is at a 1.2% pace and the three-month gain is at a 5.9% annual rate, an even stronger progression toward better growth.

    In April Euro-Area manufacturing sectors showed increases month-to-month except for intermediate goods that logged that a decline of 0.4%. Consumer goods output rose by 0.3% led by nondurables and capital goods registered an increase in output of 0.7% month-to-month.

    The growth rates for manufacturing sector show clear acceleration only in capital goods where output declined by 4.8% over 12-months, then deduced its decline to a 3.8% annual rate over six-months but then exploded to a 15.3% rate of increase over three-months. By comparison consumer goods output shows revival but not clear acceleration, gaining 0.4% over 12-months accelerating to a 4.4% pace over six-months but then slowing to a 3.5% annual rate over three-months. Consumer durables are a marginal candidate for acceleration as output falls at a 3.4% annual rate over 12-months and a similar 3.8% rate over six-months, but then shifts to a gain at a 3.8% annual rate over three months. Consumer nondurable goods show increases on all three horizons, but output gains slow over three-months compared to six-months. Intermediate goods output shows declines on all three horizons; the declines are gradually diminishing but not sequentially diminishing.

    Quarter-to-date growth rates for industrial production show headline production rising at a 1.7% annual rate early in the second quarter compared with three-point 3% annual rate gain for manufacturing. Both consumer output and capital goods output are rising at double digit rates, consumer nondurable goods are advancing at 8.4% annual rate; only intermediate goods output is declining on the quarter-to-date, falling at a 2.8% annual rate.

    Comparing output levels, the level of output on January 2020 shows overall output is still 1 1/2 percentage points below what it was over four years ago in January 2020. Manufacturing output is still lower by a little less than 1/2 of one percentage point. Durable goods output is lower by about two percentage points, while intermediate goods output is lower by about 7 percentage points. Capital goods output is slightly higher by about six-tenths of a percentage point; nondurable goods production is higher by 7.7 percentage points. Consumer goods overall show production higher by nearly seven percentage points. The consumer is king.

    We rank the performance of industrial production by its year-over-year growth rates as well. On performance back to 2007 total output and manufacturing output rank around their 18th percentile, that's in the lower one-fifth of their historic queue of growth rates - a poor performance. Consumer goods output overall has a 42-percentile rank, consumer nondurables output is the strongest industrial category with a 48.8 percentile standing, close to its median, but just below the median reading at 50%. Intermediate goods rank at about their 34-percentile standing just above the lower 1/3 of their historic queue of results. Capital goods output during this period has been especially weak, having only a 13.2 percentile standing, when ranked against its historic year-over-year growth rates.

    The chart above actually provides a good summary and description of what's happening. It shows that the various sector growth rates are still contracting, however, it shows progress being made by intermediate goods and consumer goods while it shows there's still erratic performance in the capital goods sector. The capital goods sector has been especially important to the German economy that continues to flounder. This report suggests that there is improvement in train and that Europe's industrial sector also remains irregular. Improvement is still in train. In the unfolding quarter it appears the growth is beginning to take hold.

  • Monthly German inflation has been volatile with the HICP headline logging -0.3% in March, surging by 0.8% in April, and gaining 0.2% in May. The HICP Core rose by 0.2% in March and by 0.3% in each month, April to May. The domestic CPI has been steadier monthly and better-behaved. Still, among the four measures, German inflation over three-months still runs too-hot at annual rates ranging from 2.8% to 3.6%.

    Sequentially these four inflation paths for HICP Vs the CPI and for headlines Vs the cores show either inflation stuck at a pace too-high or at a pace too-high and still accelerating. The HICP headline rises by 2.8% over 12-months, steps up to 2.9% over 6-months, then steps back down to 2.8% over 3-months. This contrasts to the domestic CPI measure that runs cooler but shows acceleration gaining 2.4% over 12-month and six-months then steps up to 2.7% over three-months. Both core rates at least ‘tend-toward’ acceleration. The HICP core is at 3.3% over 12-month and rises to 3.8% over 6-months and 3-months. The Core domestic CPI gains 2.7% over 12-months steps down to 2.6% but then steps up to 2.8%, a three-month pace above the 12-month pace.

    In addition to the sequential trends in the table described above, the chart shows a progression of year-over-year rates, 6-month rates and three-months rates. Viewed as time series all these profiles have stopped falling and each is up from its cycle low and at least ‘stuck’ if not accelerating.

    The ECB, of course, targets EMU inflation not German inflation. But Germany is the largest EMU economy, and its results get the largest weight in the inflation index the ECB does target. Having German inflation this stuck, or accelerating is not good for EMU.

    The details of German inflation data look better (these derive from the domestic CPI series). We see inflation is accelerating in fewer than 50% of the categories over each month February to March, March to April, and April to May. That is very good news. Over the broader sequential timeline, inflation accelerates compared to its year-ago pace in only 18% of the categories. Over six-months, however, a time horizon when the CPI did not accelerate compared to its 12-month pace, and the core actually weakened, the breadth of inflation rose sharply to 72.7%! It was accelerating in nearly three-quarters of the categories. But that broad acceleration did not impact the headline results much.

    All that simply points out that inflation has many dimensions; its calculation will depend on the period one chooses to measure it, the index one uses to describe it, and that, in turn, will involve the application of a weighting scheme. When inflation is not broadly experienced across index components but is embedded in components with large weights it may hit the index harder than breadth would imply. For this reason, I like to look at inflation on several measures and across various horizons.

    A perspective on German Inflation When we take this eclectic approach for German inflation we see some good news at the grass-roots level as accelerating inflation does not appear to be broadly experienced. However, it is intense enough in categories with large weights to keep the inflation metrics pressured. The good news is that the hint at inflation acceleration is weak. The diffusion data suggest underlying pressures may be more isolated rather than spreading and it may be that some of the lumpier categories shed trend tendencies more slowly. For the time being, the German inflation data are not good news and they do show inflation stuck too high.

    A Global Phenomenon Not to be Dismissed Stuck inflation is also part of a global phenomenon, so I would be reluctant to dismiss ‘sticky inflation’ and to treat it as transitory phenomenon that will eventually behave itself. We have already seen that mistake made once. There seems to be a lot of wishful thinking by central bankers these days. A nice long period of inflation containment and success has immediately brought people to the conclusion that all the sweat, toil, and sacrifice taken to get inflation low in past years was perhaps, unnecessary. Many now seem to believe that inflation will behave all on its own. But there is little evidence of that. And with global conditions shifting and China no longer competing to export goods as aggressively (or being allowed to) and with the geopolitical shift going to the display and acquisition of global power, influence, and territory, the peace dividend is certainly spent. Government budgets are more likely to be too-fat than too-thin. This means monetary policy is going to have to go ‘back to work’ to provide a counter-weight instead of resting on its past laurels. And few seem to appreciate that.

  • Manufacturing in the European Monetary Union advanced by 0.4% in April based on the performance of the median performer among the eleven countries listed in the table. That was a step up from a 0.2% decline in March and compares to a 0.6% gain in February. We have in hand S&P PMI data for the European Monetary Union in April for comparison. Month-to-month, that PMI reading was lower, as March was lower than February, although February had seen a month-to-month gain. In February, March and April, the manufacturing PMIs for the euro area continued to be below 50, that indicates output is contracting in the lexicon of PMIs.

    However, the industrial production index for manufacturing is a different kind of accounting for industrial performance. It doesn't have all the elements that a PMI report, which has production, balanced with prices, supplier delivery lags, employment, and more. The overall PMI is a blend of all those things. Industrial production is simply about output and unlike the PMI gauge which looks at the breadth of change across categories among a group of individual reporting companies, the industrial production figures tote up actual output and present the result as a magnitude of change. The PMI process and the industrial production process generally produce similar signals. The PMI approach has the advantage that it can bring us data that are more up to date since diffusion data are easy to report. The industrial production approach gives us a more precise idea of what's going on in terms of the magnitude of change in the sector. Formally the PMI gauge looks at the breadth of output increasing or declining; industrial production looks at the magnitude of the change in output.

    Typically, we compare the PMI gauge to the year-over-year growth rate in IP; on that basis, there is a ‘disconnect’ this month since IP falls over 12 months and manufacturing PMI is below 50 in April.

    However, it's also clear that there is some progress going on in manufacturing. The month-to-month changes in growth and acceleration show improvement. Growth acceleration occurs in 63% of the categories in April using industrial production; acceleration is 46% in March and occurs across 61.5% of EMU members in February. Over the last three months, output has tended to accelerate more than to decelerate. Sequential data show output falling over 12 months, rising at a 0.8% annual rate over six months – again, based on the median- and rising at a 4.9% annual rate over three months. That's an accelerating trend. Engaging acceleration by calculating the breadth of acceleration across members reported in the table, we have 70% accelerating over three months, 38.5% accelerating over six months, and 50% accelerating over 12 months. That's not a crystal-clear trend, but it's suggestive of a manufacturing sector that is regaining its footing.

    Quarter-to-date data output looks at the growth across European Monetary Union members in April compared to their first quarter average. On that basis, there is a median increase of 3.6% at an annual rate in the works. Only four of the reporters in the table show quarter-to-date declines in progress among monetary union members.

    Assessing the ratio of current industrial production to January 2020 before COVID struck, there are five of eleven members that are still below that pre COVID level, underscoring the sense in which this period of growth dating back to pre-COVID has been disappointing. We're looking at a four-year period. And we're comparing the level of industrial output over that span and finding that nearly half of the members have output that's lower than it was over four years ago; that's not reassuring. However, if we look at the shorter-term growth, the growth rank of year-over-year IP growth compared to what it's been on data back to 2007, the results show more promise. Portugal, Greece, and Spain each show growth rates that rank in the top ten-percent of what they posted over that period. France and Belgium show growth rates that rank above their respective, 50th percentiles in the 60th percentile range. This indicates that their growth rates are above their medians. However, for most of the monetary union members Austria, Germany, Finland, the Netherlands, Luxembourg, and Ireland, growth rankings are below the 50th percentile indicating growth below their medians during this span. And for most of these countries growth rate rankings are below their 25th percentile - that is, they lie in the lower quarter of all growth rates reported. This further emphasizes the weakness in growth. Although the union does show some pockets of strength and there seems to be some rebound in progress.

  • Making monetary policy in a 20-country union was never going to be easy. And coming out of a global pandemic was not going to make it any easier. But the problems faced by the ECB, the Bank of England, the Federal Reserve and others have common roots linked to polices to deal with the Covid crisis, the impact of Covid on global output, trade, and supply chains, the war in Ukraine and the elevated rate of inflation that has left most major money center countries with inflation above their respective targets.

    In this situation, central banks have been trying to find the sweet spot for policy. Central bankers have been missing their inflation targets for three years - consistently. And while the Covid crisis disrupted growth and elevated unemployment (some places much more than others). Unemployment rates have returned to their pre-Covid lows or better, and yet inflation is still above target. In the 1980s and 1990s, we know what central banks would have done but these central banks are not those central banks. The names are the same, but the policies have been shifted to reflect different policy priorities.

    EMU The euro area is a good example of all this; inflation has been over target since 2021 and the unemployment rate in the euro area has never been lower. And yet, this week, the ECB moved to cut rates. It did this even has the ECB shifted its inflation outlook higher at the current meeting. It is hard to say what analysis underlies this policy choice. The stated goal was to support the economy; at its meeting Christine Lagarde did not at all sound like she was planning a series of rate reductions. But the fact of the rate cut cannot be reassuring to those looking for the ECB to be the torchbearer for European monetary policy austerity.

    GDP growth in the euro area solidified in Q1 but the year-on-year pace is still quite weak. Among the 12-EMU members reporting in the table in Q1, only the Netherlands reported a quarter-to-quarter GDP decline. However, Austria, Finland, Germany, Ireland, Luxembourg, and the Netherlands (six countries) log year-on-year GDP declines in 2024-Q1. Six member countries showed GDP declines year-over-year in 2023-Q4; six also show GDP falling in 2023-Q3; five GDP drops are counted in 2023-Q2. There is no arguing with the notion that growth in EMU is weak. But is it- was it- threatened in a way that a single 25bp rate cut alleviated risk? Did an isolated rate cut have any role to play at all in macroeconomic policy? What was the ECB trying to tell us with that cut?

    Ranking growth rates for the 12 countries in the table shows only Greece with a year-on-year growth rate above its median growth pace on data since 1997. Globally, growth is weak- the U.S. is a notable exception; and yet as the year began, the Fed in the U.S. was preparing for as many as 3 rate cuts this year! Something at central banks has shifted. But inflation risks seem to have shifted too and for the worse. China is no longer the low wage force it once was. The peace dividend is looking as if it has been spent. A rearmament cycle now seems more likely. Are central banks operating differently or have they gone soft? We are about to find out.

  • German orders fell in April when an increase had been expected; the decline in March had been revised to be larger and as a result the picture of German manufacturing had become bleaker in April.

    The run of data on German manufacturing for the month is quite negative with very little that could be regarded as a bright spot or a positive result. A close look at the graphic, however, shows that foreign real orders are on a gradual uptrend (for their y/y growth rate) and have poked up above 0 to post a positive growth rate over 12 months. There's even a positive growth rate over six months that's stronger, still. But then, over three months, all that goes away. German domestic order growth rates deteriorate and decelerate from -8.3% over 12 months to an annual rate decline of 9.6% over six month to an annualized drop of 10.4% over three months. The headline for orders shows declines, hovering at 1.2% to 1.3% at an annual rate over 12 months and six months and then plunging at a 7.7% annual rate over three months. The year-over-year growth rate is poor, the trend in the shorter growth rates is poor, and the historic comparison shows a year ago drop of 10.9%. German orders have been weak for quite some time and that picture is continuing to paint on the same palette with the same colors looking ahead.

    Sector sales fell by 1% in April after declining by 0.3% in March and posting a 1% rise in February. For manufacturing, there's also a sequential deterioration, with a 1.1% gain in February, a 0.4% annualized drop in March and a 0.9% annual rate drop in April. Sequential growth rates, however, from 12-months to six-months to three-months show the pace of decline for real sector sales diminishing for the overall metric as well as for all manufacturing sales. That's a little bit of good news, but those statistics still show overall real sales falling at a 1.2% annual rate over three months and manufacturing sales falling at 0.8% at an annual rate over three months.

    Industrial indicators from the EU Commission in April all post negative numbers. In April, the metrics weakened in Germany, France, and in Italy but they strengthened slightly in Spain, compared to their March result. Sequentially the negative German numbers get progressively weaker from 12-months to six-months to three-months. The figures for France get slightly better, improving from a -8.2 reading over 12 months to a -5.6 reading over three months. Italy’s results vacillate between -6.5 to -7. Spain’s readings progressively improve from -6.9 over 12 months to a six-month average of -6 to a three-month average of -4.9. For the industrial data, we calculated queue standings that rank the April values in their historic queue of numbers back to 1990. On that basis, the German figures are the weakest of all with the 12.5 percentile standing, Italy has a 26.9 percentile standing, France has a 39.9 percentile standing; only Spain has a standing above its historic median, but the queue value of 52.9% is barely above the threshold of 50 that identifies where its median is located.

    Quarter-to-date readings show us where the April figures reside in growth terms relative to the first quarter average results. German total orders, foreign orders, and domestic orders all are declining with the larger decline coming out of domestic orders at -12.6% at an annual rate. Real sales are declining at a 5.2% annual rate, with manufacturing sales declining at a 4.8% annual rate.

  • Composite PMIs are back to showing more places indicating improvement month-to-month. Only 40% of these 25 reporters have PMI values that weakens month-to-month up from 56% weakening in April. But there is an overpowering tilt of reporters showing expansion compared to contraction with only 4 reporters out of 25 showing contraction (Composite PMI<50) in May, the same as in April; March, has 6 reporters below 50.

    Over 12 months more show weakening compared to a year ago, as 70% of reporters have PMIs below 50. But over six months that count is reduced to 34.8%, and over three months only 30% show weakening jurisdictions.

    Contraction has been slightly more common over three-, six-, and 12-month periods, with 6-showing contraction over three months, 9-showing contraction over six months and 11-showing contraction over 12-months.

    The percentile standings that are a completely different animal- they show the ranking of the PMI gauge over the last four years (to May 2020) compared to past performance. The 50% mark in the queue standing reflects the median value for each jurisdiction over the last four years. Ten of 25 jurisdictions are below their median performance in May. There is still a lot of under-performance.

    The composite PMIs this month come of the heels of the release of the service sector PMIs that have values above 50 for all reporting participants except Russia. However, not all countries report services and manufacturing separately. Among the ten who report separate service sectors, seven of them showed growth erosion in May compared to April. So monthly PMI improvements are laid at the feet of manufacturing sectors or countries that do provide separate service sector status.

    Smaller developing countries are struggling the most. The summary data show slight but steady increase in the average PMI that stands at 52.8 in May – above its three-month average. The median weakens over six months then rebounds above its 12-month average over three months as well as in May. The BRIC-3 (BIC? -excluding Russia) has the highest PMI average in the table at 56.2 in May. The U.S., U.K. and EMU are at 53.3, above the all-average and all-median. So, it’s the smaller economies that bring the averages lower. In May, Zambia, Egypt, and Hong Kong have PMIs below 50. France also has a PMI reading below 50. Apart from these, PMI reading below 52 are found in May for Kenya, Ghana, Sweden, and Russia (Ireland uses the reading from April that is below 52). On the strong side, May readings over 54 are featured in the U.S. (54.5), Spain (56.6), India (60.5), Saudi Arabia (56.4), UAE (55.3), Singapore (54.2), and China (54.1).

    In terms of relativity, the queue standings for the BRIC-3 are at 76.5%, the All-average is at 56.7%, the U.S., U.K. and EMU are at 55.8%, and the All-median is at 55.1%. All these groupings show PMI values above their four-year medians. For those countries not included in any of those groups, the average queue standing is 54.4% and the median queue standing for them is 48%, their queue standings average below medians when pooled.

  • Switzerland
    | Jun 04 2024

    Swiss CPI Remains Tempered

    Inflation in Switzerland remains as a global envy. At 1.5% year-on-year and sequentially stable, or still moderating, the Swiss inflation rate continues to perform in its desired range as other advanced money center countries struggle to control their budgets, revive growth, and return to their pre-Covid inflation objectives.

    Swiss growth remains moderate. The services sector underpins expansion while manufacturing in Switzerland occurs in the same global environment as for everyone else. That sector shows damped activity with a PMI reading indicating sluggish and contracting activity.

    Swiss inflation trends reveal year-over-year inflation rates across CPI categories as higher in only 25% of them. Inflation rates over six months show more pressure with inflation accelerating in 75% of categories, but over three months conditions are stable with inflation acceleration in only 50% of categories balanced with deceleration.

    That tempered behavior is not surprising because Swiss domestic ‘core’ inflation is even more tempered than its headline series. Swiss core inflation rises by 1.1% over 12 months and by less than 1% annualized over three months.

  • The S&P PMI readings for May 2024 in manufacturing show a tendency for improvement month-to-month. The median PMI value increases to 50.6 from 49.8, While the proportion of reporting units improving moved up to 50% from 33%, leaving that proportion at a dead-neutral level.

    PMI levels summarized The global medians for individual average readings sequentially over 12 months, six months, and three months show improvements from 49.3 to 49.4 to 50.2. The gains are steady but very moderate improvements in train with all values clustered closely around ‘50’ which is the break-even point between expansion and contraction for these manufacturing PMI indexes. While the average reading over three months is at 50.2 and the average in the current month is at 50.6, these are values that marginally above 50; it's hard to get too excited about the fact that the indexes are up above 50 again, indicating manufacturing expansion. The median is above the level of 50 for the first time in 22 months – a long stretch for manufacturing contraction. But the average reading for this same group has been above 50 for four months running and had been below 50 for 18 months prior to the start of that string.

    The breadth of improvement The proportion of reporters improving over three months moved down to 44% after rising sharply to 94% over six months and sitting at 83% over 12 months. These results have flipped from what had been reported previously as year-over-year weakening in the PMI indexes compared to a year ago had been common. But now, there's been enough improvement that we're looking at year-over-year increases as well as net increases over six months. But since there has been improvement from those lows, the proportion of reporters improving over three months has declined to 44%.

    Very neutral neutrality is indicated The rank standing for the diffusion readings of these reporters in the table shows nine of the 18 with values below 50% and nine of the 18 with values above 50%. The median value of all these individual percentile queue standings is also at 50%. All of this underscores the sense of neutrality in this report as the queue standings show that values are at their four-year median values and that the median itself sits at 50% and the number of reporters who are improving on the month is also split at 50/50. And the diffusion values themselves are just beginning to rise above a diffusion level of 50 indicating an extended period of (largely modest) contraction may be coming to an end.

    China, the United States, and EMU China, the U.S., and the European Monetary Area all show manufacturing PMIs that are in a definable upswing in the chart. For the euro area, the upswing is about a year old; for the U.S. and China, the upswing is a year and a half to two years in progress. The gradients are still relatively shallow but also relatively stable.

  • Inflation measured by the European Monetary Union’s HICP rose by 0.1% in May, a seemingly small amount, particularly after increases of 0.2% in March and in April. However, the year-over-year rate at 2.6% is higher than it was in April at 2.4%; the year-over-year inflation rate has actually risen even with that small increase in May! Disinflation progression, however, continues to be in train from 12-months to six-months to three-months, as 12-month inflation rises at a 2.6% annual rate, then barely steps up to 2.7% annualized over six months, before dropping back to 2% over three months. Over three months, the inflation rate is back to the ECB’s target. However, over 12 months, the 2.6% rate continues that string of excessive inflation numbers (now up to 35-months-nearly three continuous years) that the European Central Bank has been over target. With inflation backtracking on the month, this is the highest year-over-year inflation rate since January of this year.

    Countries mostly show ongoing progress Results for the large economies in the monetary union continue to show inflation progress for the most part. There's persistent deceleration in France where the 12-month rate at 2.6% falls to 1.5% over three months. In Spain, there's a 3.8% 12-month inflation rate that deflates to 0.7% over three months. In Germany, the 2.8% inflation rate over 12 months moves up to 2.9% over six months and then hovers at 2.8% again over three months. Italy has the lowest year-over-year inflation rate of the bunch, but it shows acceleration with inflation of 0.8% over 12 months rising to a 2.2% annual rate over six months and then stepping up to a 2.3% annual rate over three months.

    Core/ex-energy inflation still largely behaves... Italy's core inflation rate moves down on a consistent basis from 2.2% over 12 months to a 1.9% pace over six months to 1.7% annual rate over three months. In contrast, the German rate excluding energy is 2.7% over 12 months, down to 2.6% over six months and back up to 2.8% over three months, stuck in a very narrow range and still substantially above the target sought by the European Central Bank.

  • The EU Commission indexes for May rebounded to 96 from 95.6 in April after standing at 96.3 in March. On a month-to-month basis, there's very little change across the major components of the EU indexes. The industrial index is unchanged at -10, the retailing index is unchanged at -7, the construction index is unchanged at -6, consumer confidence improves to -14.3 from -14.7, and the services index moves up to +7 in May from +6 in April. The gains in those two sector readings are responsible for the gains and the EMU sentiment index on the month. But three of the five component readings are unchanged month-to-month in May.

    Across 18-early reporting countries, only four showed a deterioration in readings in May, compared to seven that deteriorated in April, and five that eroded in March. Fewer countries have been posting declines in their country sentiment indexes in recent months.

    Rankings, however, continue to reveal a great deal of weakness, as the overall monetary union metric has only a 34.3 percentile standing which puts its rank just above the lowest 1/3 of its historic results. Among the eighteen countries listed in the table, only three have rankings above their historic medians. Those are Lithuania, Cyprus, and Greece, all are relatively small European Monetary Union member countries. Among the four largest countries, German performance ranks in its 24.7 percentile, France has a 41.3 percentile standing, Spain has a 42.8 percentile standing, while Italy has a 48.6 percentile standing. None of that is impressive.

    The five components of the European Monetary Union index show above-median standings for retailing and for construction, with the industrial gauge at a 26.4 percentile standing, the consumer confidence at a 27.5 percentile standing, and services at a 40-percentile standing. The European Monetary Union in May has a 34.3 percentile standing.