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

  • April readings for the S&P total or composite PMI survey show mixed performance in April with more countries showing deterioration month-to-month than showing improvement, but with the average reading in April higher than the average reading in March. That makes it a bit of a standoff in terms of trying to assess the performance of the survey. More countries are doing worse but on average countries are doing better.

    These tendencies are provided without any weighting for the country’s GDP size; that's another caveat. Looking at the United States, the European Monetary Union, and the EMU’s four largest members as though they are all separate and independent observations (which they are not) shows two worsening was in April with the same relative results in March; February shows only one worsening and five improving. Those are certainly good statistics and good news since these are large economies carrying a large weight in terms of their contribution to world output.

    In Asia, Japan, and China show different performance with China improving month-to-month in February, March, and April but with Japan worsening month-to-month in April and February but improving in March.

    Turning to sequential data that look at averages and changes over three months, six months and 12 months, we find the highly developed European and the U.S. readings all improving over three months; however, four of six of those readings deteriorate over six months compared to 12 months. Three deteriorate and three improve on balance over 12 months compared to the average ending 12 months ago.

    We also assess the performance of these countries by looking at their PMIs in a queue of ranked data since January 2020. In that queue, Italy and Spain have 70th percentile standings, above their historic medians (medians occur at a ranking of 50%) along with the European Monetary Union with a 53.1 percentile ranking. However, the United States has a 36.7 percentile ranking, Germany, a 40.8 percentile ranking, and France, a 46.9 percentile ranking; that leaves us with three readings above their median and three below for the full period assessment.

    Over the entire sample, the averages from February to March to April cluster in a very tight range from 52.0 to 52.5; the median lies in a range of 51.3 to 52.7. Over those three months, there are 4 of the countries in the survey below a reading of 50 which means they're contracting in April. Six are contracting, in March and six are contracting in February. The averaged data show improvements from three-, six-, and 12-months. On those metrics, nine countries contract over three months, 11 contract over six months, and 11 contract over 12 months.

    Turning to statistics on acceleration, we find that 52% of countries are slowing in April but only 44% in March and only 32% in February. The averages are fairly stable; there are deteriorating circumstances in terms of the proportion of countries showing readings below the month before and on a month-to-month basis. Looking at the sequential data for three months compared to six-months, six months compared to 12 months, and 12 months compared to 12-months ago, the percentage of countries slowing steadily diminishes from nearly 70% over 12 months to 56.5% over six months to 30.4% over three months. The broad picture shows less slowing while the monthly picture shows that there may be more slowing creeping into the process.

    The average queue standing, which positions these countries in their queue of data since January 2020, is at 51.6%. Across our sample of 25 countries, 12 of them show readings below their respective 50th percentile rankings. This gives us a sense that across the sample based on the ranking data and the average of the PMI data statistics are hovering close to the median for the period. However, this is comparison over a four-year period that has seen a good deal of contraction in play.

  • GDP in the European Monetary Area in the first quarter rose by 1.3% (saar), offsetting a 0.2% quarter-to-quarter decline in the fourth quarter and a 0.2% decline in the third quarter of 2023. All seven of the early reporters in the table show positive GDP growth in the first quarter unlike the fourth quarter when two of them, Germany and Ireland, showed declines in the fourth quarter of 2023. Growth rates decelerated in Belgium and Portugal in the first quarter with each of them posting growth rates that were only slightly slower than what they had logged in the fourth quarter of last year.

    Much attention in the new set of European GDP releases, centers on Germany, which posted a 0.9% increase (at an annual rate) in the first quarter after falling at a 2% annual rate in the fourth quarter. Some news services report this as Germany having avoided recession and this is understandable considering the fixation that the financial press has for the ‘rule of thumb’ that claims that two consecutive quarters of GDP declining defines recession. In fact, that does not define a recession. It is only a ‘rule-of-thumb.’ While some call it a ‘technical definition of recession’ it, in fact, is not a ‘rule’ or a ‘definition’ and there is nothing technical about counting all the way from ‘one’ to ‘two.’

    Recession or not it looks like trouble... A closer look at the table shows more serious problems for Germany. If we move to the right-hand portion of the table, we present year-over-year growth rates that, instead of measuring growth from adjacent quarters and annualizing it, we're going to, in this part of the table, look at the raw percentage change and growth from the same quarter of one year ago. The result of that percentage change will be an actual annual -not just an annualized - calculation of growth. When viewed in that way, the growth rate in the first quarter of 2024 is -0.2%; in the fourth quarter of 2023 it's -0.2%, in the third quarter it's -0.1%, and in the second quarter of 2023 it is positive but only logging a growth rate of 0.1%. This is a period of weak German GDP; output has declined on balance over the last four quarters for three quarters in a row. And the quarter before that, when German GDP did not decline, it barely managed any increase at all.

    Recession or not, here I come? Whether this is a recession or not, it's going to depend on the judgment of economists who look closely at the German economy. It certainly is not going to be declared by a journalist who's going to look at just quarter-to-quarter growth that is simply going to be too narrowly focused to reveal what is going on in the underlying German economy. Performance certainly is disturbing despite the growth rate that's positive in the first quarter of 2024. Typically, when economists try to assess recessions, there are three metrics that are considered: one is how broad the decline in economic activity is, the second involves the depth of the decline that occurs, and the final metric is the length of the period of time over which this disruption Deacon of activity occurs. So, the three measures are: depth, duration, and breadth. Viewed in this way, the decline in German activity is broad because GDP is the broadest measure of economic activity; activity is declining year-over-year for three quarters in a row. That statement takes in both the category of breath and of length. We're talking about declines in GDP over full year periods that are occurring for three consecutive quarters. On the other hand, the intensity of the decline is only -0.2% for two of these annual periods and it's -0.1% for the other one. All these clearly are declines; they're not particularly severe. And since, at this point, Germany's long-term growth rate is not particularly high, the shortfall of these minor negative growth rates may not rise to the level of disruption that will cause the experts on Germany's economy to say that it is a recession. On the other hand, maybe it is.

    Whatever you call it Germany’s economy is not doing well. Over this same span of time looking at growth in the European Monetary Area four-quarter growth in the first quarter of 2024 is only 0.4%. In the fourth quarter of last year it was only 0.1% and the third quarter of last year was only 0.1%. So once again while skirting the ‘popular definition’ of recession for these numbers, the European Monetary Union is showing extremely weak growth. On the other hand, the European Monetary Area also shows a decline in growth in the fourth quarter of 2023 and in the third quarter of 2023 which would trip that rule of thumb signal about it being in recession. Yet, its string of year-on-year growth rates is stronger than the string for Germany even though Germany doesn't trip that so-called ‘technical signal.’ This is a good reason not to get to bound up with the precise label that we put on the economy and whether we call it recession or not. Weakness is simply weakness. And is there a huge difference between a severe slowdown and a mild recession?

    Ireland also posts a long string of negative growth rates. In the case of Ireland, these are fairly severe with one of them showing year-over-year growth falling 9.1%, which clearly would be a recession signal and certainly is in the context of all the other negative growth rates that Ireland is reporting. Ireland is a clear-cut recession case.

    Quarterly data paints a kinder picture of developments in the monetary union as only Portugal and Belgium are decelerating and there are quarter-to-quarter growth rates in the first quarter with all the rest of the early reporting members showing acceleration. In the fourth quarter, only three countries decelerated compared to their third quarter growth rates. The important lesson here is that GDP growth across these countries in the monetary union as well as for the monetary union as a whole are not showing an intensification of the downward pressures that might be lingering in these economies. Instead, after a period of weakness, we're starting to see growth stabilize and accelerate.

    The tendency is for acceleration and deceleration in year-over-year data are a little more concerning. The color coding and the table of growth rates occurs from a full precision calculation of the growth rate so growth rates that to the single-digit that appears in the table. The number may seem to be identical with an adjacent number, but may not be when they are taken to the next decimal point and that reflects why some growth rates that appear to be ‘unchanged’ are color-coded as decelerations in the table. In the first quarter, there are decelerations in France, Germany, Italy, and Portugal. There were three year-over-year decelerations in the fourth quarter; those came from the European Monetary Union as a whole, Germany, and Ireland. The third quarter saw the broadest decline across the Monetary Union with decelerations occurring in every country reporting in this table except Belgium. And the second quarter of 2023 saw deceleration occur in four of the reporting countries as well as in the European Monetary Union as a whole.

    We also parsed the data in the table into the four largest economies in the EMU versus the other economies. On that basis, looking at the year-over-year data, the four largest economies do not show year-over-year declines in the last four quarters while the rest of the European Monetary Union shows declines in three of the last four quarters.

    Compared to the European statistics, U.S. data are somewhat astonishing. U.S. growth year-over-year of 3% in the first quarter of 2024, 3.1% in the fourth quarter of 2023, 2.9% in the third quarter, and 2.4% in the second quarter of 2023. There's nothing like that among these countries. In the European Monetary Union, the closest to the U.S. result comes from Spain.

  • Europe
    | Apr 29 2024

    EMU Indexes Ease in April

    The European monetary union showed weakness in April; the overall index fell to 95.6 this month from 96.2 in March. The April reading of 95.6 is slightly above the February level of 95.4 but still below the January reading of 96.0. Over these last four months, the index has vacillated and has a narrow range but has eroded more often than it has improved across sectors, and it is still locked in an eroding trend.

    The component indexes of the industrial sector, retailing, construction, and services, as well as consumer confidence, generally showed weakness month-to-month or stability in April. Services and construction were unchanged in April from their March levels demonstration stability. Retailing fell by one point, posting a - 7 reading in April from -6 in March. The industrial sector slipped to -11 in April from -9 in March; these sectors exhibited weakness. The exception was consumer confidence, and that wasn't much of an exception, as it rose to -14.7 in April from -14.9 in March. However, it has been gradually improving from January to February through March and April. From mid-2022 onward, consumer confidence, despite its clear deep negative readings, has been engaged in a process of ongoing improvement.

    Of the 17 countries in the monetary union that report to this survey in a timely fashion, seven of them showed declines in their overall indexes in April, compared to March. March was a month of relative strength with only four countries weakening relative to February. However, February had been the opposite, with weakness prevalent across monetary union members. In February, only six showed improvement compared to the month before – and each of the four largest economies showed deterioration.

    The queue percentile standings rank the countries and the sectors on data back to January 2020. The monetary union has a 31.7 percentile standing on that timeline, leaving it in the lower third of all observations reported during that span. Retailing and construction have queue percentile standings above the 50th percentile which marks them as above their median estimates over this period. The industrial sector is the relative weakness with the 22.4 percentile standing, followed by consumer confidence with a 24.7 percentile standing. The services sector is climbing with a 45.9 percentile standing closing in on its median value over the past four years.

    Across member countries, only three have percentile standings above their historic medians for this period. They are Cyprus, Greece, and Spain. They're hardly bellwethers for the community and all Mediterranean countries. Among the largest four economies, especially Germany, the largest economy in the monetary union, weakness prevails. Germany has a 20.7 percentile standing, 36.8% for France, 44.1% for Italy, and 56.4% in Spain. The largest EMU economies are not very strong on a relative scale (queue standings).

    Among the rest of EMU members, Estonia has the weakest standing at 6.7%, Finland at 10.3%, Austria at 17.4%, Belgium at 23.2%, and five others clustered in the 30-percentile range. For all EMU members large and small, the percentile standing averages 37.3%, a bit higher than the ranking for the EMU which is a size-weighted measure.

  • Money growth still contracting; credit growth is flat EMU Money Growth- Money and credit growth in the European Monetary System has ground to a halt with M2 money supply still decelerating in nominal terms. Three-year growth is at 2.6% at an annual rate, two-year growth at a 0.5% annual rate, and growth over three months is flat. When viewed in real terms, there's a little more progress that appears but the growth rates for real money supply are negative. Over three years European Monetary Union money grows at a rate of -2.7%; over two years it is weaker at a -3.8% annual rate; over 12 months real money supply declines at a 2.5% annual rate. Over three months, real money supply has declined at a 1.3% annual rate, reversing the step-down in contraction. There's a gradual and somewhat uneven movement toward money growth contraction to be less restrictive; however, negative real money growth rates persist and when it comes to nominal money growth the performance is simply flat.

    EMU Credit Growth- Credit growth in the monetary union faces similar trends. Private credit grows at 2.7% at an annual rate over three years, at a 1.9% annual rate over two years, but private credit growth over three months has only a 0.2% annual rate of growth. Nominal private credit growth has slowed its pace so much that over three months its pace has been close to zero. Looking at private credit growth in real terms, we see it shrinks at a 2.7% annual rate over three years; it shrinks at a 2.5% annual rate over two years, that's further reduced to a -2% annual rate over 12 months. Over three months, the annual rate for credit growth is further reduced to -1.1%. The degree of contraction for credit in the European Monetary Union has been reduced; however, the EMU continues to demonstrate weak nominal credit growth and declining inflation adjusted credit growth.

  • German consumer confidence/climate on the forward-looking GfK measure has reached its highest reading in the past two years. On the surface, this sounds impressive, but in fact over the past two years confidence has varied in range from -24.4 to -42.8 with a median value of -28. The reading today of -24.2 for May is only marginally better than what it has been over the last two years and over the last two years there have been 16 readings above -30. The six-month moving average of the climate index increases to -27.2 in May from -27.8 in April. The six-month MAV was last at this level in February 2024 and was higher in August 2023-January 2024. What we have with the May reading is a marginal nudge to the higher part of the range that we have been seeing for the past two years. If we go back to April 2022 that's when we start to see a real shift in the level for confidence on the GfK measure, we see a dramatic shift in the level of climate. In April 2022, the headline measure was -15.7 and in March 2022 it was -8.5. While the May reading takes us back to the cusp of those very low readings, it only does that chronologically; it doesn't do that in terms of the intensity of the reading.

    Context! - The rank standing of the reading provides some information on this. The May 2024 climate reading stands in the lower 9.1 percentile of its historic queue of data. Viewed as a position and its high-low range, the consumer climate reading from GfK has a 34.6 percentile standing. That higher standing comes about because the low point for the reading is so very much lower than where it is right now below point comes at a reading of -42.8. The economic expectations and income ratings as well as propensity to buy ratings are also weak but not as weak as the GfK climate headline. The component readings for the GfK report lagged by one month so the most up-to-date reading for these components are through April. As of April, the economic expectation rating rose from -31 in March to 0.7 in April; the income rating rose from -1.5 in March to 10.7 in April; the propensity to buy reading rose from -15.3 in March to -12.6 in April. These readings give us count percentile or cube percentile standings: the 36.5 percentile for economic expectations, the 45.6 percentile for income expectations, and the 25.9 percentile for the propensity to buy. Income expectations has made the largest leap forward with its jump to 10.7 in April from -1.5 in March; it's a leap that is clearly unmatched by the improvement that we've seen in the headline for climate that is barely inching ahead, having posted -28.8 in March, risen to -27.3 in April and moved further up to -24.2 in May.

    Improvement, yes, but still not good- All the components have queue or count percentile standings below the 50-percentile mark which means they are below their historic median levels. The propensity to buy is the relative-weakest component just above the lower quartile of its historic queue. Income expectations are closest to their median, with their 45.6 percentile standing. While ‘expected’ German incomes are getting close to their median value, the propensity to buy is lagging behind badly. And economic conditions are also considered to be inferior to expectations for income. It's clear that the German economy is still in this very weak period that it's been in since COVID and the Russia invasion of Ukraine. Germany hasn't really made the transformation to a moderate recovering economy. The IFO report, released just earlier this week, revealed widespread improvements but still extremely low percentile standings for the various sectors on that gauge. There is considerable evidence suggesting that the German economy is improving; however, the metrics that assess performance of industry or the level of consumer confidence or comfort continue to lag badly behind historic norms.

    Elsewhere in Europe- The table also provides information for other countries the rankings for Italy, France, and the United Kingdom. They generally show better consumer confidence than in Germany’s GfK metric. The confidence metrics for these countries tend to lag one or two months behind the German measure which is not surprising because the GfK metric is for May; it's looking one month ahead. Italy has an updated value as of April; from February to March to April, the Italian data showed slippage in confidence although the percentile standing for the April Italian confidence measures is its 70th percentile of its historic queue of data, quite a bit better than the numbers from Germany. France's most up-to-date number is for March; for France, conditions have been holding steady. The percentile standing for its March metric is at its 37.4 percentile like the components for the German GfK metric that are up to date through April. The U.K. confidence measure has been stable over the last three months with just some minor slippage. It has a 32nd percentile standing in its historic queue of data. All these cases evaluate the consumer metrics back to June 2002. Queue (or rank) standings for all these countries, therefore, are executed over the exact same timeline so that they are directly comparable.

  • The April IFO improves but is a mash-up- The IFO survey in April exhibits broad-based improvement in climate, current conditions, and expectations. However, among the three categories, the least-broad improvement is in current conditions module. Current conditions show a monthly worsening for manufacturing, construction, and wholesaling. But the all-sector reading is boosted to a value of_+2.6 in April from +0.6 in March on the back of improved conditions in retail and a strong month-to-month gain in services conditions. Manufacturing still slips by five points month-to-month as wholesaling slips by 3-points, and construction drops by about a point more in April than in March. But retailing improves month-to-month by five points and services improve by nearly six points, driving the overall all-sector current-index higher. The current situation is still clearly in flux with so much weakening and improving going on at the same time in different sectors and industries.

    Changes are one thing; the level of assessment is another- We are speaking here (so far) only of changes since the absolute levels of these readings remains weak or no better than middling across the board. The all-sector queue rankings in April find climate at a 23.2 percentile standing, the current index at a 15.9 percentile standing, and a 15.1 percentile standing for expectations. The standing data leave no doubt about the continuing impacted state of the German economy. The monthly gains are still good news. But this news is still not enough to buoy spirits or enough output to make a significant mark in the outlook. Moreover, the bifurcated nature of the current readings, with some improving sharply and some still back-tracking sharply, leaves a quizzical ‘buzz’ in the air.

    The current survey- In the current survey, construction (54.1 percentile) and retailing (66th percentile) are the only current queue standings above 50, a level that marks each entries’ historic median. Manufacturing, wholesaling, and services all still reside in the lower one fifth or one fourth of their historic queue of data- weaker-than- ‘this’ only one fourth or one fifth of the time.

    The climate and expectations surveys- All the climate readings are below their 50th percentiles with retailing’s 46.9 percentile standing, the closest to breaking through to an above-median reading. But the all-sector climate standings are otherwise bottom quartile readings or worse. Despite gains (and broad gains!) this month, expectations are marked by an all-sector standing in its 15.9 percentile. Ominously, the services category that shows such a jump in its current reading makes the smallest possible one-tick improvement in expectations for April. That is not a resounding endorsement of the month’s jump as a future trend.

  • EMU Shows Some Services Upswing, But still Is Range-bound The PMI data for April from S&P Global shows a mixed performance that tends toward strengthening except for the United States. U.S. data in April show a weaker composite, a weaker manufacturing sector, and a weaker services sector and these three readings were also weaker month-to-month in March in the United States. The other seven countries reporting on the table show stronger data for April and while a bit more mixed strengthening in March as well. On average, the monthly data from February to March to April show the composite readings creeping higher. Manufacturing ratings move higher in March compared to February and then stall in April. For services, there is a steady progression of stronger service sector numbers from February to March to April.

    Sequential data are far more equivocal with the average Composite Index at the same level over three months as it is over 12 months. The manufacturing reading is a tick higher at 47.7 over three months compared to 47.6 over 12 months. The services reading is slightly lower on average over three months at 51.3 compared to its 12-month average of 51.5.

    The PMI this month highlights conflicting trends with the February-to-March-to-April data showing an upswing while the averages from 12-months to six-months to three-months show flatness to slight weakness. On balance, it's not the improving picture that we'd hope to see at this point.

    The queue percentile standings data place the April flash data in a four-year queue of observations and viewed in that way the average for the Composite Index is at 62nd percentile, the average for manufacturing is at the 38th percentile and the average for services is at its 67.6 percentile. The services sector is barely inside of the top third of its 4-year historic range for this. Manufacturing at a 38-percentile standing is a good ten percentage points of percentile standing points below its median.

    Of course, they're very different experiences across countries. India has the strongest performance with rankings in the 90th percentile for the composite, manufacturing, and services. Japan has firmed showing strong standings with the composite ranking in its 87.8 percentile and a services sector in its 91.8 percentile. But Japan’s manufacturing is still only in its 51st percentile. Japan and India are the only two countries that have manufacturing percentile standings above their respective medians (above the 50th percentile mark). Manufacturing in the euro area as a whole has a 22.4 percentile standing, Germany has a 16.3 percentile standing, and France has a 16.3 percentile standing. Manufacturing remains a weak sector in the global economy. India is benefiting from some relocation activity from some of the businesses leaving China.

    The table also presents data and changes from just before COVID struck using January 2020 as a base. On that comparison, Germany, France, and the U.S. have weaker composite readings than they had four years ago. The European Monetary Union has a higher reading but only by 0.4 points, on its composite diffusion index. India's composite is higher by 6.1 points, Australia is better by 5 points, Japan is better by 2.5 points, and the U.K. is better by 1.7 points. None of these are very remarkable increases over a period of four years, but the statistics for India and Australia are quite respectable.

  • Dutch consumer confidence improved in April, rising to -21 from -22 in March, continuing its slow but steady climb higher. The willingness to buy index also continues to make a steady climb; it improved to -13 in April from -14 in March and -17 in February.

    A strong six-month change: The simple period-to-period changes (not annualized) show that most of the change in the index has come over the last six months. Over the last six months, confidence is up by 17 points compared to being up 16 points over 12 months; a 7-point gain has occurred over the last three months. For the willingness to buy, there’s an increase of 14 points over six months compared to a 17-point gain over 12 months, once again most of the improvement coming over six months. Since then, the improvement is evenly split as the index has improved by 7 points over the last three months.

    Climate: The measure of climate from the Netherlands continues to improve; it rose to -34 in April from -35 in March and from a reading of -41 in February. Looking at its sequential changes, the bulk of its improvement has come over six months as well, where there's a 22-point gain which is larger than the gain that it made over 12 months; there's a gain of 14 points; however, the pace of gains obviously has slowed with only five points worth of gains occurring over the last three months.

    Still, the message from the Netherlands is that we're seeing improvements and the improvements, while slow, continue to be steadily coming month-by-month. The last six months has been particularly good for the improvement in conditions in the Netherlands.

    Belgian compared We can compare the improvements in the Netherlands to Belgium’s consumer confidence index, a country from the same region and a member of the European Monetary Union. Belgian confidence deteriorated over six months, it fell by one point over six months, was unchanged over 12 months, and then showed more weakness recently by falling by 4 points over three months. The readings for the Belgian index show -6 in April, a deterioration from -5 in March with the March reading being unchanged from its value in February. These comparisons show that the Netherlands is having a much better recovery experience in 2024 than is Belgium, an economy that is traditionally linked strongly to the German economy.

    Queue standings across metrics- We are evaluating these metrics in terms of their queue standings; on data since about 1990, we see that the Belgian data that are improving by less recently have the stronger queue standing over the entire period with a standing in its 54.5 percentile. This compares to a confidence ranking in the Netherlands at its 25.7 percentile, a willingness to buy standing in its 24.7 percentile, and the climate reading in its 30.6 percentile. Belgium has improved to a higher level than the Netherlands, but the Netherlands is currently experiencing a faster pace of improvement from a worse level of confidence than Belgium. These metrics are borne out over a shorter period as well. Since January 2020, the Belgian confidence indicator is up by 20 points while the Dutch confidence index is up by two points, the willingness to buy index is up by four points; Dutch confidence is weaker by three points.

  • Global inflation trends have been in concert for major money center countries/areas- excluding Japan, of course. Inflation flared after Covid struck and in the wake of the Russian invasion of Ukraine. It continued to ramp up more than central bankers thought. Interest rates were raised from very low levels- the U.S. led the pack in terms of rate hike speed, getting its key rate up to its prevailing inflation rate in record time after a long period of being asleep at the switch. It said it stood prepared to hold rates ‘higher longer.’ Then the next unexpected thing happened; inflation fell sooner and more sharply than expected and it did this globally, not just in the U.S. However, we are now into phase three of this process: inflation went up more and longer, inflation then fell more and faster and now inflation is off peak but not back were we want it—and it is looking stubborn. This is more or less a global money center country/area description of inflation. Inflation that went through its boom-bust phase, as you clearly see from the sequential growth rates of the German PPI is now up from its lows. The headline price level is falling but losing momentum. The core PPI is only falling in its ‘legacy’ 12-month rate.

    German PPI inflation falls by 2.8% over 12 months, falls at a 3.4% annual rate over six months, and falls at a 1.2% rate over three months. Core PPI inflation falls by 0.7% over 12, months then rises at a 0.7% annual rate over six months and three months. The core points the way for trend.

    The NSA (not seasonally adjusted) sequential data show acceleration across and three major PPI sectors: consumer goods, investment goods and intermediate goods. Prices only fall over 12 months for intermediate goods. All other sectors trends show increases by period and all show acceleration in progress.

    German CPI data show higher inflation over three months than over 12 months for the headline and the core with a dip in between – not a steady state acceleration but a clear hint at where things are headed and with German inflation rates clearly above the EMU-wide 2% mark.

  • Registrations for cars in Europe for March fell by 8.8% month-to-month after falling by 1% in February. January, however, had been a strong month for registrations in Europe. The sequential trends are mixed and do not show a clear way forward. The 12-month change in sales/registrations falls 4.7%. Over six months registrations fall harder at an 11.9% annual rate, but then over three months registrations gain at a 7% annual rate. These data are prone to volatility. To adjust for that, I execute the same calculations on three-month average data to smooth out the volatility and let the trend shine through. Unfortunately, this procedure still does not produce a clearer picture of trend.

    Chart 1, executed on year-over-year growth rates, shows registrations gradually losing momentum among reporting countries. Sequential growth rates across countries finds Germany and Spain with accelerating sales/registrations. France and Itay with fairly clear trends showing decelerating sales. Meanwhile, the U.K. trend shows confusion with no clear pattern emerging.

    Looking very broadly, all reporting countries show registrations lower in March everywhere except for France, in 2024 compared to January 2020 before Covid struck. France is the lone exception that shows registrations in March higher by just 2.2% than they were over four years ago. That is not exactly a stunning success.

  • When the Music Stopped, or at Least the Inflation Progress... U.K. inflation on the HICP measure eased to 0.4% in March from 0.5% in February. The month-to-month CPIH measure also rose by 0.4% from 0.5% in February. The CPIH excluding food, energy, alcohol, and tobacco rose by 0.4%, the same as in February. The Bank of England looks at several inflation gauges; it targets HICP, which rose 3.2% year-over-year in March and slowed slightly from its year-over-year pace of 3.4% a month ago. The HICP steps inflation down to 2.7% over six months but then inflation rises at a 3.9% annual rate over three months, not what the Bank of England was looking or hoping for. The CPIH is 3.7% year-over-year, down to 3.3% at an annual rate over six months and up to an even worse 4.4% over three months. The core CPIH that excludes food, energy, alcohol, and tobacco, pretty much all things necessary or fun in life, rose by 4.7% over 12 months, cooled to 3.7% over six months, but then ticked up to 3.8% at an annual rate over three months.

    Inflation makes progress, but not reliably enough The bottom line is that inflation, as represented by either six-month or three-month inflation rates, is generally lower than it was over 12 months ago, indicating ongoing progress on the inflation front. However, the progress isn't as substantial as the Bank of England would like to see; there's some backtracking over three months compared to six months that's not what monetary policy is looking for to gain confidence that inflation will continue to fall toward target.

    Diffusion results are mixed Sequential diffusion- Diffusion calculations applied to the categories in the table showed an inflation over 12 months that exhibits diffusion of 23% compared to inflation rates of 12-months ago. The diffusion measure is the percentage of categories where inflation is accelerating period-to-period. Over six months, diffusion falls to 7.7%. HICP inflation on that comparison fell to 2.7% from 3.2%. The diffusion calculation comes from comparing the inflation rate in each category over six months to the same category over 12 months. If the inflation rate is higher over six months than over 12 months, we count it as acceleration. Acceleration was quite rare over six months, occurring only for housing and household expenditures. However, over three months with the HICP rising to 3.9% compared to 2.7% over six months, diffusion jumped from 7.7% to 61.5%. Being above 50% is critical because it means inflation is accelerating in more categories than it is decelerating and that tends to add more authenticity to the acceleration of inflation over three months. It tells us that the acceleration was not just because of a few rogue categories or several large increases in categories that had a high weight, but rather it's something that's broad-based.

    Monthly diffusion- Monthly data are more lenient on the diffusion front. In March diffusion is only 38.5% with the month-to-month gain of 0.4%, below a 0.5% rise in February. Inflation is accelerating in March in only 38.5% of the categories. However, in February inflation rose 0.5% compared to 0.1% in January and inflation accelerated in 61.5% of the categories, clearly over half of them. In January with that low inflation print of 0.1%, inflation accelerated in only 30.8% of the categories. Over the last three months, the diffusion data were quite good for two months and moderately bad for one of them. However, when we go back to the table to look at the three-month changes compared to six-month changes, the BOE has that high 61.5% diffusion number staring us in the face.

  • The ZEW survey improved as U.S., German and EMU current conditions and macroeconomic expectations (where surveyed) all increased on a month-to-month basis.

    Table 1 summarizes the shift with the TEXT reflecting month-to-month changes. On that basis, there were improvements (increased strength) in 15 of 16 surveyed metrics. However, the text COLOR reflects the relative value of the underlying queue ranking series. Only two queue rankings in the table, the U.S. economic situation and German economic expectations in April are above their respective historic medians on data back to 1992 (and, hence, print black in the table). This means most series are still quite weak and, while improving month-to-month, still emerging from sub-normal conditions.