Introducing

Robert Brusca

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

Publications by Robert Brusca

United Kingdom| Nov 15 2024
UK Manufacturing Weakens
Industrial production in the United Kingdom fell by 1% in September after rising by 1.3% in August and falling by 1.3% in July, continuing a choppy pattern. In September output declined for capital goods, for intermediate goods, and for consumer nondurable goods with consumer durable goods output unchanged on the month. This bevy of declines followed monthly output increases across all sectors in August which followed output declines in all sectors in July. The monthly output trends have had all this stability of a car suspension on a cobblestone road.

Beyond the monthly gyrations sequential output trends show output getting progressively weaker. Manufacturing output falls by 0.7% over 12-months; it declines at a 2.4% annual rate over six-months and then accelerates that decline to a 3.9% annual rate drop over three-months. However, output does not get sequentially weaker across all of the sectors; it only weakens sequentially for intermediate goods output. However, of the 12-sequential sector calculations (across 4 sectors and three periods) all of the observations are negative except three. The bottom line is that the overall trend shows output declines are becoming steeper, and the sector level observations show that output is broadly declining across sectors.

The September figure ends, data for the third quarter; in that quarter (to date) output managed to increase by 0.8% at an annual rate with increases in all of the sectors except capital goods where output fell in the third quarter at a 1.7% annual rate.

Looking at some key industry details, we see quarter-to-date declines or flat performance at all industries in the table except for food, drink, & tobacco where there's a 1.8% annual rate increase in the third quarter.

The UK remains in a troubled spot and although the Bank of England has started to reduce interest rates, it has done it in an environment where inflation is not entirely behaving and perhaps this is because of the observation that economic growth is so weak and the belief that with growth this week inflation excesses will not be able to persist. Weak manufacturing is a global phenomenon. The UK does not set itself apart from the countries of the G7 by posting weak industrial results. It is unclear when there will be a turn-around in global manufacturing. The US economy that often leads business cycles is showing some signs of doing better, but its manufacturing data have not turned around partly because its economy has been hit by a significant strike and by a series of hurricanes that have interrupted the good sector of the economy. The outlook remains unclear and marred by ongoing geopolitical tensions with governments staffed by new participants all around.
by:Robert Brusca
|in:Economy in Brief
Europe| Nov 14 2024
EMU IP Falls and Stays on a Sequentially Declining Path
Output in the European Monetary Union (EMU) falls by 2% month-to-month for the headline series that excludes construction. This follows an increase of 1.5% in August and decline of 0.3% in July.

Sequentially, output excluding construction follows 2.4% over 12 months it follows at a 3.8% annual rate over six months and falls at a 3.7% annual rate over three months showing a tendency toward accelerating weakness.

Manufacturing output follows suit, falling by 3.1% over 12-months falling at a 6.2% annual rate over six-months and following at a 6.8% annual rate over three-months.

The sectors for industrial production show vastly different results and trends. For consumer goods output is up by 3.6% / 12 months it accelerates to growth and 11.8% annual rate over six months and holds a strong 10.8% annual rate of expansion over three months. This tendency toward acceleration contrasts sharply with intermediate goods output output falls by 2.7% / 12 months accelerates the drop to a 4.9% annual rate of decline over six months and then falls at an even faster 7.2% annual rate over three months. Capital goods output shows relatively steady declines over all the time horizons output of capital goods falls by 5.2% / 12 months at a 5.6% annual rate over six months and then it falls at a 4.3% annual rate over three months.

The strength that we see in industrial production is lodged in the consumer goods sector and concentrated and non durables where the growth rates show clear acceleration meanwhile the output of durable goods under consumer goods shows waffling and mostly negative output trends.

Across the monetary union in September We followed 13 early reporting members and among those 6 show declines in output what's 7 showing increases in output. Among the largest countries in the monetary union Germany and France show output declines well Italy and Spain show output increases. In August six countries showed output declines and in July seven showed output declines. The performance of output in the last three months has been decidedly mixed.

Looking at output sequentially over 12 months output declines in eight of these 13 reporters over 12 months I'll put the kleines in nine of them over six months well I'll put the clines for eight of them over three months. Quite apart from looking at the weighting involved which is involved in looking at the headlines for the monetary union that we previously reported the breadth of declines across these countries shows the weakness is widespread. However, putting aside the issue of whether output is rising or declining, the separate question is whether output is accelerating or decelerating. Over 12-months output accelerates in 75% of these reporters compared to a year ago. Over six-months output accelerates across 41% of reporters compared to their 12-month growth rates. Over three-months output accelerates across 54% of the reporters compared to six-month growth rates. The 12-month result shows impressive breadth, however, the growth rate over 12 months is still negative and so it's simply the European Monetary Union stuck in a shallower hole than it was 12-months ago.

In the quarter-to-date there are output declines at 8 of the reporting countries and, since these are September data, they are complete for the third quarter.

Separately, we logged data for Sweden and Norway: these two Northern European economies show different experiences with one showing an output the climb and the other one an output increase over each of the last three months. Sequentially, both of them have mixed trends. However, both of them show increases in output in the third quarter, with output in Sweden rising at a 2.7% annual rate, and output in Norway rising at an 11.7% annual rate.

On balance the industrial output data for Europe remains weak with most trends being weak and with the experience across countries showing a great deal of weakness that continues to be scattered across the various countries. This point is most easily made by noting that among the early reporting monetary union countries in the table not one of them shows output increases over three months six months and 12-months, however, five countries Germany, Ireland, Luxembourg, the Netherlands, and Italy show declines on each of those horizons.

Growth in the monetary union continues to be touch-and-go with a leaning toward stop. Monetary policy has been and appears still to be on a declining path in EMU even though inflation has not remained disciplined.
by:Robert Brusca
|in:Economy in Brief
Portugal| Nov 13 2024
Portugal’s Inflation Puts in a Good Month But No Longer Sports a Strong Down Trend
Portugal's headline inflation rate in October shows the HICP falling by 0.3%. Portugal's National CPI index drops by 0.1% and the National core inflation rate drops by 0.1% as well. These breaks for inflation in October across all the measures reflect reversals from what had been strong gains in September. In September, the HICP measure rose 0.8% month-to-month, the National CPI headline rose by 0.5%, and the National core rate rose by 0.6% month-to-month. Monthly inflation is volatile; good news comes, and good news goes. This month, the good news has come; however, placed in context, the good news doesn't really seem to have been quite good enough.

Portugal’s sequential inflation: Sequential inflation in Portugal shows that the HICP inflation rate is up 2.6% year-over-year; it's up at a 2.5% annual rate over six months and at a 2.5% annual rate over three months. All of these growth rates are above the 2% pace targeted for the euro area as a whole by the European Central Bank. Of course, not every country has to meet that target. The ECB target is for the economic-weighted HICP, which gives each country a weight in accordance with its economic contribution to the euro area.

Portugal’s nation inflation barometer- We look at the National index because it allows us to get an earlier view of the core inflation rate which is not available on an earlier basis in the HICP format. The National data on the CPI in Portugal show 12-month inflation at 2.3%, six-month inflation dipping under that magical 2% level at 1.8% at an annual rate, then moving back up to 2.2% at an annual rate over three months. Meanwhile the National core inflation rate is 2.6% year-over-year; it runs at a 2.5% annual rate over six months and accelerates to a 3.1% annual rate over three months.

The chart’s trends- The chart in this report shows these trends very clearly. It is only a chart of year-over-year inflation, but it includes both the HICP headline and the National core index. It shows that inflation progress had been in train; it since has given way to moving sideways or higher. It's the domestic core index that seems to be trending slightly higher - and that's not good news.

Inflation diffusion (breadth): At the bottom of the table, we look at the various categories in the national CPI index to chronicle whether inflation is accelerating or decelerating. In October we see there are more decelerating pressures with only 41.7% of the categories showing inflation acceleration. September showed 50% of the categories showing acceleration- a balanced result. In August, two-thirds of the categories were showing acceleration- clear pressure. These differences are not so surprising because monthly data do tend to move around quite a lot.

Sequential trends in Portugal- Sequentially, we see the good news in the 12-month index where only 33.3% of the items show acceleration compared to their 12-month ago inflation rate. It's over this long-term comparison that inflation progress is clearest. However, looking at six-month inflation compared to 12-month inflation, deceleration is only at 50% marking overall inflation pressures as balanced with disinflation factors. Over three months, the acceleration factor ramps up to 58.3% showing that there's more acceleration in progress than there is deceleration on the nearest horizon.
by:Robert Brusca
|in:Economy in Brief
Global| Nov 12 2024
ZEW Current Conditions Deteriorate in Europe; Improve in the U.S.
ZEW current economic conditions deteriorate in Europe and improve in the United States in November. Expectations drop for Germany but rise in the U.S.

Remarkable shifts- The U.S. shows two remarkable shifts as U.S. inflation expectations moved from -36.7 in October to +2.7 in November, the second sharpest change in the history of the U.S. series exceeded only by the shift that occurred post-covid in March 2022. U.S. macroeconomic expectations also shifted sharply to +13.3 in November from -8.2 in October. That shift is the 14th largest in the history of that series. Both of these series have a history of nearly 33 years.

Survey BEFORE the U.S. elections finds firmness- The strength of the U.S. shift is impressive; it comes for a survey conducted BEFORE the U.S. presidential elections but after the Fed began its easing campaign. U.S. inflation expectations are still low at the November reading, which has a 23-percentile ranking. But now macroeconomic expectations have risen above their median (above a ranking of 50%) for a standing in their 61.4 percentile. U.S. current conditions have improved slightly in the month as well, rising to a net positive reading of 27.2 with a month-to-month rise of about 3 points to a standing at its 45.2 percentile, a bit short of its historic median at a diffusion value of 29.3.

Normalcy ahead for U.S./not so for Europe- The U.S. survey is climbing back into the normal zone whereas Europe and Germany are weak and getting weaker. In the case of Germany, the economic situation erodes to -91.4 in November from -86.9 in October, falling to a 4.1 percentile standing. That bad combination represents a significant month-to-month drop to an extremely weak level. The U.S. and Europe are in very different circumstances and apparently in different phases of their business cycles as well. Despite the ECB cutting rates, Germany is sinking, and Europe’s politics also are frayed. German expectations are still deteriorating in November and demonstrate half the ranking for U.S. expectations. Inflation expectations in Germany and in the euro area improved somewhat in November.
by:Robert Brusca
|in:Economy in Brief
Global| Nov 08 2024
IP Is Mixed across EMU in September
Industrial production in September was mixed across the 12 early reporting members of the European Monetary Union (EMU). Output fell on the month in Ireland, the Netherlands, Germany, Greece, France, and Finland, a diverse group of EMU members. At the same time, output was reported stronger in Spain, Portugal, Malta, Belgium, Italy, and Austria. The median change in September was for a decline of 0.2 percentage points; that fall follows a median change of zero in August versus an increase of 0.5% in July.

Looking over broader periods from 12-months to six-months to three-months, median output falls over 12 months by 0.5%, it falls by 2.2% over six months, and it falls by 0.5% over three months. The medians of the annual rate changes over those various periods remain consistently negative.

Over 12 months compared to 12-months ago, output is accelerating in 77.8% of the reporters. However, over six months compared to 12-months, output accelerates in only 38.5% of the reporters. Over three months compared to six-months, output accelerates in 55.6% of the reporters. While the statistics on acceleration are mixed, there seems to be more of a tendency for output to accelerate than to decelerate over these various timelines. The monthly data similarly show mixed statistics on output acceleration month-to-month for September, August, and July.

By country, output is accelerating over the three sequential broad periods in Austria and in Spain. However, sequentially, output is decelerating in Germany, the Netherlands, Malta, and Greece.
by:Robert Brusca
|in:Economy in Brief
Germany| Nov 07 2024
German IP Sinks in September
German industrial output fell by 2.5% in September. Output decline for consumer goods, capital goods, and intermediate goods. The September drops follow broad-based increases in August that followed widespread and deep declines in July.

Sequentially, output falls 4.6% over 12 months; it falls at a 7.9% annual rate over six months and drops at a 10.7% annual rate over three months. The various sectors generally follow the headline pattern revealing progressively falling output across manufacturing sectors from 12-months to 6-months to 3-months.

The construction sector also is showing steady declines and declines that are getting sequentially larger over shorter periods (persistent deceleration).

In contrast, real manufacturing orders are showing growth and acceleration sequentially. Real manufacturing sales also ‘go their own way’ declining on all horizons without any clear change in speed.

Surveys of the German manufacturing sector were mixed in September compared to August. Survey values in September are generally below their July levels. Average levels of the surveys have generally showed some modest improvement from their 12-month averages to their three-month averages.

France, Spain, Portugal, and Norway are early reports of IP data along with Germany. Spain and Portugal show output increases in September, while there are declines in France and Norway. Sequential trends among these countries are chaotic except for Spain that shows clear sequential output acceleration.

The just-completed third quarter shows declines- negative output growth rates and weakening survey metrics with few exceptions. The exceptions are real orders that rose strongly in Q3 (17.5% annual rate). Output in France and in Norway also showed increases in the third quarter.

However, we also rank all of these metrics on growth rates or levels as appropriate. Only Portugal and Norway have indicators that are above their medians on growth rates calculated over 24 years. German output is in its lower 9-percentile. Real manufacturing sales are at their 11th percentile. But orders are doing better; real German orders, an important forward-looking series, has a 46.2 percentile standing, still below its historic median, but getting closer to the median that occurs at a ranking of 50%.
by:Robert Brusca
|in:Economy in Brief
Global| Nov 06 2024
Composite PMIs from S&P Improve
In October, only six reporters saw their composite PMI measures weaken compared to September. Two of those were large EMU economies, France and Spain. But in the EMU, there still was improvement compared to September. The U.S, U.K., and EMU average has the same reading value as in September. The overall average improved in October to 51.9 from 51.4 in September. The median overall reading also improved to 51.8 from 50.0. Still, there is a net decline for the overall average and median compared to August values. Some improvement month-to-month but not much overall: a one-month improvement, a two-month decline.

Sequentially, looking at average levels, over three months, six months and 12 months, there is little volatility in these readings. The average over three months is slightly stronger than the 12-month average while the median is slightly weaker over three months compared to 12-months.

The queue percentile standings tell a story of ongoing weakness. The standing of the average is at the 49.2 percentile, nearly on top of its four and one half year average. The median value is at its 48.3 percentile. Again, these two measures are below their respective multi-month medians but are also quite near to those medians. The BRIC countries (I exclude Russia so its actually a reading for the BICs) average is at a 69% standing.

There are 13 of 25 reporting jurisdictions that have a queue standing below their medians (below 50%). Among the 12 reporters whose standings are above 50%, the average standing is 64.1%. Among those below 50% the average standing is 35.4%. Interestingly, the performing economies have about 14 percentage points above their median while those that were not performing average about 14 percentage points below their medians.
by:Robert Brusca
|in:Economy in Brief
Global| Nov 05 2024
OECD LEIs Global Expansion Still Broadly Underway
The OECD leading economic indicators normalized or amplitude adjusted uniformly show that expansion is still underway in the global economy. The OECD-7 metric is up by 0.1% in September for the normalized leading indicators after being flat in August. There are positive expansions indicated over 12 months, six months, and three months. Apart from looking at growth rates, the level of the indicator for the OECD 7 has a 55.8 percentile standing, placing it above its historic median value. For the core group of OECD countries, expansion remains firmly signaled underway, even if not strongly.

The normalized indicator for Japan is flat in September after being flat in August. It shows a decline over 12 months but net increases over six months and three months with a queue percentile standing on the index at 50.7% which barely puts Japan over its median and puts it into growth territory; however, it does stay in growth territory slightly above median growth.

For the United States, the change in the normalized leading indicator in September is zero after zero in August as well. The U.S. has an increase of 0.1% over 12 months; it increases to 0.3% at an annual rate over three months and six months, hardly strong readings. However, the queue standing on the LEI level for the United States has a 57.2 percentile standing, a solid standing, clearly above the historic median (at a 50% standing) and clearly putting the United States into growth territory.

The OECD likes to look at six-month changes in its metrics. The second panel of this table looks at the changes in six-month averages month-to month and the net change over six months over progressive 6-month periods. On this score, we see September and August expansions in the OECD-7 grouping as moderate and consistent increases in September and August. For Japan, there are small consistent increases; from the United States strong increases in September and August. China logs two severe monthly declines. However, over broader periods based on six-month changes, we see increases logged even for China. The exception is having a decline from 6-months ago in Japan in its six-month change. Turning to the queue percentiles where we rank the different regions or countries on six-month growth rates, the OECD 7, Japan, and the U.S. have percentile standings in a range of 55% to 65% clearly above their historic medians while China comes in with a standing at its 39th percentile below its historic median.

The bottom panel of the chart shows the amplitude adjusted leading indicators from the OECD and here we look at the levels of the indicators with levels above 100 indicating normal to above normal growth and levels below 100 indicating below normal or below average growth. We see negative scores for France, Italy, Spain, and China consistently over the last four months. The ratio of the current index to six-months ago provides a negative reading for Spain and for China. The other metrics in the table signal ongoing expansion in the United States, the United Kingdom, Japan, the OECD 7, and Germany. These are relatively broad readings indicating continuity and global growth. However, the growth rates aren't particularly strong. For example, the German index has only at 50.7 percentile standing, the same as Japan's. These are razor edges standings, barely above their historic medians but again signaling growth but growth that is above the historic median value by only a small margin. The OECD 7 has a standing at its 55.8 percentile. Italy, France, and the United States have readings that are in their 57th percentile, again, relatively firm above their historic medians. For now, the strongest reading is coming from the U.K. with a 93.5 percentile standing. Spain and China both have percentile standings below their 50th percentile and are at the mid-30th percentile mark.
by:Robert Brusca
|in:Economy in Brief
Global| Nov 04 2024
MFG PMIs from S&P Stagnate
On the month, 7 of 18 countries reported weaker manufacturing PMI results than they had the month before. However, the median on a month-to-month basis didn't change at all. Sequentially looking at averages over 12 months, six months and three months, we see the median hasn't changed very much across that span either. It has stayed just below the value of 50, which indicates unchanged output, oscillating between values of 49.6 and 49.7. That's a great deal of consistency for these averages over these three different multi-month segments. All this as global trade growth has come to a halt according to the Baltic trade volume index.

The bottom line is that there isn't really a lot of trend in these overall data and the conditions of economic weakness remain in force although it's weakness of the mildest sort, technically below the value of 50 but - for the most part – these are numeric figures that would round up to a value of 50!

The queue percentile standings show that among these 18 observations, only 6 have values above their historic medians; that would refer to any queue percentile standing value of about 50%. The average percentile standing across all 18 reporting units is at 48.6, again fairly close to breakeven; however, the median value is only at 36.8% - the median is significantly weaker than the average.

As a group, the strongest reporters are the ‘BRIC’ reporters, with queue percentile standings at 54.4% for China, 35.1% for Russia, 73.7% for India, and 61.4% for Brazil. The weakest reporters in the table are Turkey at a 7% standing, France at a 17.5 percentile standing and Indonesia and a 19.3 percentile standing.

Looking at changes since January 2020 when COVID began to emerge, ten of the 18 reporters have even weaker values today than they had in January 2020 while the strongest reporters are Russia 2.7 points higher, India 2.2 points higher, and Brazil 1.9 points higher. No other country has a gain relative to January 2020 any stronger than 0.7 points.

Looking at the breadth of improvement, 66.7% improving compared to where they were 12-months ago; we see 38.9% improving over six months compared to over 12 months and 27.8% improving over three months compared to six months ago. This trend is unnerving, showing smaller, and smaller, proportions of reporters that are doing better than they had been doing over the previous period. And this is not good news even though the diffusion median value hasn't changed very much nor have the various period averages.
by:Robert Brusca
|in:Economy in Brief
Europe| Nov 01 2024
EMU Unemployment Is Still at a Low Level and Easing
Unemployment remains low in the euro area in September. It is tied for its all-time record low since the union was formed. So, the ranking of the rate is in its 0.3-percentile that says it has been this low or lower only 0.3% of the time. That is much lower than for any EMU member in the table. The lowest ranking (highest standing) in the table is Italy at 1.6% followed by Ireland at 7.4%. The reason the EMU rate ranks so much lower is that it is the confluence of all these low unemployment rates that is unusual making the EMU-wide rate even lower.

Trends The sequential trends from 12-month to 6-months to 3-months shows five of 12 countries in the table with falling rates of unemployment. Only four show unemployment falling on balance over six months with one having unemployment unchanged. Five have unemployment unchanged over three months as well. This shows the trend for unemployment rate to fall is still in place and that may seem surprising given the weakness in some of the recent economic data from Europe. Of course, one reason for this is also that Europe’s large economy Germany has its unemployment rate rising over 12 months and six months and it is on a different trend that the EMU area- that seems unsustainable.

Over the most recent three months, we see the unemployment rate falls in six countries month-to-month in August compared to only three in September. September has five countries with the unemployment rate rising that compares to only three in August.

The labor market trends may be running out of gas as far as lowing the unemployment rate is concerned. Still, the ECB is still cutting rates to provide economic support. But the labor trend does not show decay sequentially. The annualized monthly drops are all in the same ballpark for 12-month, 6-month, and 3-month changes. But the situation with Germany needs to be resolved since it will be hard for the euro area to perform well if Germany can’t.
by:Robert Brusca
|in:Economy in Brief
Europe| Oct 31 2024
Oil Drives EMU Inflation for the Target as the Core Gets Sticky
Inflation in the European Monetary Union turned flat in September with the headline flat and the core flat month-to-month. Over 12 months, headline inflation is rising at a 1.7% annual rate, the same as over six months; over three months, that pace steps down to 1.6%. Headline inflation is across the board consistent with the European central bank’s target of inflation of around 2%. Core inflation is higher. Over 12 months, the core runs hot at a 2.8% pace, rising over six months at a stronger 3.2% annual rate and then dipping to a 2.3% annual rate over three months. The three-month pace is coming much closer to the ECB's target for inflation.

The four largest economies in the EMU also had inflation fall in September. In Germany, prices dropped by 0.2%, the same as in Spain. Headline prices fell 0.7% in France and just ticked lower by 0.1% in Italy. Price dropping across the board is a special sign; in this case, it signals dropping oil prices.

Sequential inflation rates for headline inflation in large economies also are looking good. Germany and Spain have the highest 12-month inflation rates at 1.7%. France is next at 1.4% and then Italy logs a 0.7% 12-month inflation rate. However, over six months, inflation picks up above target for Italy and Germany to 2.7%; it cruises at a 1.9% annual rate in France and at 1% annual rate in Spain. Over three months, prices are flat in Germany, rising at a 0.2% annual rate in France, rising at a 0.3% annual rate in Spain, and rising at a 2.3% annual rate in Italy. The results we see for headline inflation clearly echoed across the large economies of the European Monetary Union.

However, as having been the case for some time, the sticking point for inflation is the core. This is because Brent oil prices fell by 8.1% in September and fell by 7.6% in August after rising by 0.1% in July. In fact, Brent oil prices are falling to a 47.7% annual rate over three months, falling at a 29.3% annual rate over six months, and falling at a 24% annual rate over 12 months. This helps to explain why headline inflation is doing so well. Core inflation is showing more signs of being stuck at a too-high level.

Core (ex-energy) inflation in the case of Germany is at a 2.6% annual rate over 12 months. Spain’s core pace is at a 2.4% annual rate, Italy logs a 1.9% annual rate, and France checks in at a 1.5% annual rate. For France and Italy, core inflation over 12 months is very much in the fold of the target pace, while in the case of Spain and Germany, the departures aren't so great as they both hover around 2.5% at an annual rate. However over six months, German inflation is still up by 2.4%, the same as in Italy. Spain logs in at a 2.2% annual rate. France stays with the low 1.5% annual rate. Over three months, inflation runs at a 2.8% annual rate for ex-energy in Germany; it's at a 2.4% annual rate for the core in Spain and 2.1% for the core in Italy, compared to an even weaker 0.4% annual rate in France.

Even with core inflation getting stuck in the EMU economy overall at 2.8%, inflation is still not very far from the ECB's goal and is broadly behaving for the large economies. And if economic data are deemed weak enough, inflation doesn't seem to be that far from the ECB's target nor is it misbehaving enough to keep ECB rate cuts off the table.
by:Robert Brusca
|in:Economy in Brief
Europe| Oct 30 2024
EMU GDP Estimate and Early Reporters Show Some Life
GDP growth in the European Monetary Union advanced by 1.5% in the third quarter at an annual rate, an acceleration from the second quarter’s 0.8% rise. It compares to gain of 1.2% at an annual rate in the first quarter. It is also the strongest quarterly rise since an increase of 2.4% at an annual rate in the third quarter of 2022. The year-over-year change is a gain of 0.9%, compared to 0.6% in the second quarter. That is the strongest year-over-year gain since the first quarter of 2023 when GDP rose by 1.4% year-over-year.

There are seven early reporting EMU members. Among these seven, four showed GDP advancing at a stronger pace in Q3 (Q/Q) than in Q2. Weaker growth was registered by Belgium and Italy with Portugal’s growth unchanged quarter-to-quarter.

Over the last six months, the large EMU economies have been holding back overall growth. The four largest EMU economies saw growth advance by 1.1% at an annual rate in 2024-Q3 compared to 2.5% growth in the rest of the EMU. In the second quarter, growth among the largest four economies also trailed growth in the rest of the monetary union. This is a switch from the usual standard. But year-on-year growth in the smaller economies is also higher in Q3 than in the largest four economies although that is the reverse of the previous three quarters.

Growth in the region has been weak for some time. The ranking of year-over-year growth rates on data back to 1997 shows all early reporting EMU members have rankings of growth in Q3 (year-on-year growth) below their historic medians (below a ranking of 50%) except Portugal and Spain. Portugal and Spain are exceptions with year-on-year growth rates that rank above 50% as well as above the ranking of the United States.

In the third quarter, only Italy has a negative quarter-to-quarter growth rate. Over four-quarters, only Germany and Ireland have negative quarter-to-quarter growth rates. Germany that does not have two quarters of negative (quarterly) growth back-to-back in the last three quarters has five consecutive quarters of negative year-over-year growth! However, the growth decline on this timeline has been modest. For Germany, this has been much more a period of pronounced economic stagnation than of economic decline.

Since 2011, the U.S. has had averages GDP growth about one percentage point (annualized) faster than the EMU. Since 2021, that difference has been the same on year-over-year comparisons, but it has become larger favoring the U.S. on quarterly comparisons. The median growth rate among early EMU reporters ranks at 40.2% while EMU growth ranks lower at 32.6% largely because the slower growing large economies have a greater weight in the EMU GDP construction than in the calculation of the median.
by:Robert Brusca
|in:Economy in Brief