Introducing

Robert Brusca

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

Publications by Robert Brusca

Japan| Sep 14 2026
Japan’s IP Shows Developing, Solid Uptrend
Japan’s industrial production rose in July largely on a jump in gas & electric utilities output. But manufacturing IP made a small move backward, with output falling by 0.1% month-to-month. Consumer goods output did turn sharply lower in July, dropping by 1.3% month-to-month, but intermediate goods output advanced by 0.2% as capital goods output continued to gear up, rising 3.2% month-to-month after rising 5.5% month-to-month in June. These gains in capital goods output followed a 3.1% drop in May.

Overall industrial output sequential gains show an accelerating output trend. The 12-month gain is 3.6%, the six-month annualized gain is nearly identical at 3.5%, and the three-month annualized gain is at a hefty 9.7%.

Sequential trends in manufacturing show more fluctuations and less of an arrow-straight trend. For manufacturing, 12-month growth is 4%, while three-month annualized growth is 8%. There is a lull in between, with six-month growth showing a 0.2% annual rate decline. Manufacturing sectors generally show a similar pattern, with solid 12-month growth, weaker growth over six months, and a pick-up over three months, with the three-month pace rebounding and turning sharply stronger than its 12-month pace. We see that for intermediate goods and capital goods, with only consumer goods showing steady output deterioration from 12 months to six months to three months. Yet, as the graphic shows, retail sales are holding up and tracking with industrial output gains overall.

On a quarter-to-date basis, very early in Q3, output is rising at a 12.3% annualized rate over its Q2 level. Manufacturing output is up at a 7.6% pace. Consumer goods output is a drag, with output falling at a 5.1% annual rate, offset by a 5.4% gain in intermediate goods and capital goods output exploding at a 40.1% annual gain. Utilities & mining output also are rising clearly and strongly in the quarter.

However, Japan’s economy is still in recovery mode. As the table clearly shows, all IP measures are lower than they were one year ago. The economy is still digging out after retrenchment. Moreover, output is still broadly weaker than it was in January 2020 before COVID struck. That’s a long time for output to not have risen, 6½ years. On that comparison, only investment goods output and electric & gas utilities output are higher in July of this year than in January 2020, and in both cases it is by less than 2%.
by:Robert Brusca
|in:Economy in Brief
Japan| Sep 11 2026
Japan’s PPI Cools in August – Still Runs Hot
One thing is clear: it is not a deflationary world Japan's PPI headline cooled in August, rising by only 0.1%. However, the headline for the all-manufacturing PPI rose by 0.3%, indicating more pressure.

Sequential inflation pressures for Japan’s overall PPI show a 7.6% gain over 12 months, accelerating to 12.7% at an annual rate over six months, and calming to a still-hot 4.5% over three months. For all-manufacturing, the 12-month gain is 7.7%, the six-month pace annualized is 12.4%, and the three-month pace annualized is 4.6%. These sequential results are very similar for these two series. Despite a substantial deceleration in place from 12 months to three months, the three-month pace is still hot, and the pace of the last two months is still at a troublesome 5% to 5.5%.

Japanese PPI data are available ahead of the CPI data. In the shaded columns of the table, we can compare PPI trends in the EMU and the U.S. through July, as well as Japan's own CPI trends.

These lagged comparisons show that PPI inflation in the European Monetary Union, while excessive over 12 months and six months, somewhat like Japan, has shown a sharper deceleration over three months. In the U.S., finished goods PPI inflation shows somewhat more tempered overall performance compared to Japan, but the just-released August data have turned hot again. The global PPI picture is not reassuring.

However, Japan's CPI, which is the more important reading for central bank attention, shows inflation at 2% over 12 months, rising to a 3% pace over six months and to a 4.4% annualized rate over three months. Japan’s core inflation similarly registers as an expansion of about 1.5% over six months and 12 months but logs a 2.8% increase over three months. Inflation remains restless.

Brent oil prices declined in August, but in spot markets oil is back over $100 a barrel, so it's not clear that we should view August, or the three-month trends, as good news. The Strait of Hormuz continues to be adversely affected. While some oil is getting out, clearly not enough is in circulation to calm world oil markets. In addition, there's a lot of concern about what's going to happen to LNG supplies as winter approaches and LNG is used for heating fuels, particularly in Europe.

Quarter-to-date inflation shows hot numbers for Japan's overall PPI and all of manufacturing. Running at a pace of about 6% in the quarter, there's not much that's reassuring despite the fact that there is a step-down of inflation in August. And will the August ‘print’ even be sustained?

The right-hand column shows the correlation between the price measures in the stub of the table at the left and oil prices. Japan's PPI has positive correlations of about 0.4 with Brent; the European Monetary Union has a PPI correlation of about 0.55. In the U.S., the PPI finished goods index has a correlation of about 0.4. However, in Japan, the CPI has a negative correlation of about -0.2 to -0.4.
by:Robert Brusca
|in:Economy in Brief
Germany| Sep 10 2026
A Counterpoint to the ECB Rate Hike from German Core Inflation
On the day that the European Central Bank met and decided to raise interest rates by 25 basis points, the German inflation report for August firmed, showing that headline inflation rose 0.3% on the month, with the core rising by 0.1%. Year-over-year headline inflation in Germany is excessive at 3%. However, the core rate at only 2.3% is not that far above the ECB target for all of the monetary union, a pace of 2%. German inflation for the headline is 3.6% over six months and 3.7% over three months; however, over three months and six months, German core inflation is running at 2%, the ECB’s chosen speed for inflation for the union as a whole.

German core inflation provides a counterpoint to headline inflation. It enables a strong argument that energy price inflation has not spread throughout the monetary union. However, with the ECB raising rates, German bond yields have risen to a 17-year high and the ECB seems determined to treat energy price inflation as something important and significant that it needs to fend off.

Economic conditions still show growth in the monetary union as weak at 1.0%. Growth among the top four economies is 1.1% with growth for the rest of the union year-over-year at 0.5%. So, the ECB is raising interest rates in an environment where growth is modest-to-low and where headline inflation is surging but where core inflation is much better behaved. The pace for Germany at 2% over three months and six months is right on target; 2.3% over 12 months is slightly excessive. For the entire euro area, the core inflation rate is closer to 2.5%, which is uncomfortable but not a terrible overshoot, certainly not with energy prices having flared the way they have.

Diffusion statistics show that inflation over three months in Germany has accelerated in only 27.3% of the categories; however, inflation has accelerated in 72.7% of the categories over six months and in 63.6% of the categories over 12 months. The tempered three-month inflation rate breadth does not dominate the other two metrics; however, it provides another counterpoint to the notion that inflation from oil price increases is spreading.
by:Robert Brusca
|in:Economy in Brief
Europe| Sep 09 2026
German, French, and Portuguese IP Fall
Early reports for industrial production showed declines in Europe, with German industrial production falling 1.1% in July, French output falling 0.8%, and Portuguese output falling 0.2%. Nonmonetary union members Sweden and Norway both showed increases in July. The German IP report was released on Monday during the U.S. holiday; the Portuguese IP was released on September 1, while the French IP was reported today.

German production shows relatively steady declines over 12 months, six months, and three months of around 1% or a little bit more at an annual rate. Outputs of consumer goods and capital goods on all three horizons show declines. Intermediate goods output shows declines over 12 months and three months, with an intervening increase over six months at a 2.2% annual rate.

German manufacturing output fell by 2.3% in July, showing steady declines over 12 months, six months, and three months, the same as headline output. However, German manufacturing orders in real terms increased by 2.5% in July, showing an accelerating pattern from 12 months to six months to three months. Current real manufacturing sales fell by 1.5% in July and may still be holding back output. There is a sequential deceleration in real sales, with sales falling by 0.3% over 12 months, by 3.5% over six months at an annual rate, and by 7.3% over three months at an annual rate. Presumably, that pattern is about to be dominated and reversed by the strength in real orders.

Other German indicators from ZEW, IFO, and the EU Commission showed improvement in July compared to June, although the sequential readings are less reassuring since only the EU Commission index shows persistent improvement.

French industrial output fell by 0.8% in July, showing accelerating output declines from 12 months to six months to three months. Similarly, Portugal showed a 0.2% decline in July, with accelerating output declines from 12 months to six months to three months.

The nonmonetary union members Sweden and Norway not only showed strong output increases in July but also sequential acceleration from 12 months to six months to three months.

The EMU begins the quarter to date with weak results as German, French, and Portuguese outputs show declines, while Sweden and Norway are showing very strong increases. For the European Monetary Union members, it's a poor start to a new quarter.
by:Robert Brusca
|in:Economy in Brief
Japan| Sep 08 2026
Japan’s Economy Watchers Regain Faith Steadily
Japan's economy watchers are not in a state of bliss, but they have gradually been improving their outlook after suffering a severe setback when the attacks on Iran began.

The current index for economy watchers, which is a diffusion index, at 46.4, is below 50 and therefore indicates some deterioration in attitudes about the economy. However, the reading reflects an improvement, and there has been an ongoing improvement in the current situation.

The future reading, similarly, has been improving; in August, the future index is at 48.3, also indicating some deterioration, but less than a month ago, with an ongoing improvement visible there as well.

Standings The percentile standings of the current index and the future index show slightly stronger readings for the future than for current assessments. The future index has a 49.4 percentile standing, placing it near its median for the evaluation period that goes back to August 2005. The current situation has a standing at its 43rd percentile, about 7 percentile points below its median for that period.

Current Index The current index shows three readings above their 50th percentile standings: eating & drinking places, corporations, and corporate manufacturers. However, even so, all of the current readings in August have diffusion values below 50, indicating that all are showing deterioration, although less deterioration than in the previous month.

Future Index The future reading itself is below its 50th percentile; however, six components are above their 50th percentiles. These include the overall assessment of households, the reading for eating & drinking establishments, services, corporations, including both manufacturers and nonmanufacturers as separate readings. The future reading for housing is extremely weak, with a 29.2 percentile standing, and employment has only a 36th percentile standing in the future index; that's similar to its weak 33rd percentile standing in the current index.

The lagging performance of employment in both indexes is certainly worrisome because that's the basis for jobs and spending. On the other hand, the future reading for households is above its 50th percentile. Households in the current index show a 44.7 percentile standing, below their median as well as below 50 overall, but not weak in a way that is especially worrisome.

The graph shows that there is an ongoing improvement in the assessments by the economy watchers. Their assessments dropped very sharply at the time of the Middle East conflict and the threat to oil supplies. Those assessments have since been recovering quite steadily and have moved to positions back closer to neutral, although still not to the point of registering growth. Among the current and future readings, only the reading for the service sector of the future shows a diffusion value in August above 50, indicating actual expansion; at least there's one, and that's a start.
by:Robert Brusca
|in:Economy in Brief
Global| Sep 03 2026
Total PMIs Show Slow Improvement in August
The total PMIs from S&P improved in August, with only eight of the reporting jurisdictions showing month-to-month backtracking. Only seven of the reporters in the table show readings below 50, indicating a contraction of output in the reporting country or unit.

The average and median readings for the full table show improvements, by and large, month to month in the total PMI readings. The sequential progression is more complicated, with a weakening in pace over six months and an improvement over three months compared to six months.

France, Ghana, Egypt, and Qatar show persistent levels of activity below a diffusion value of 50, indicating ongoing contraction over three months, six months, and 12 months, in addition to recent monthly readings that remain below 50 (except for Ghana in the latter case).

Nine of these 25 regions have percentile standings, depicted in the far right-hand column, below the 50% mark. These represent rankings of the August values among all observations back to January 2021. Readings below 50% indicate values below their respective medians on this timeline. So, 9 of 25 countries or reporting units as of August are showing readings that are below what they produced as a median over the previous approximately 4½ years. Among some of the larger countries, this includes France, the BRIC member Brazil, and Hong Kong, which has traditionally been a strong-performing unit when it was the British Crown Colony of Hong Kong.

Over three months, only five of the reporting areas have weakened compared to their averages over six months, and only seven of the reporting units show contraction over three months.
by:Robert Brusca
|in:Economy in Brief
Norway| Sep 02 2026
Norway’s Industrial Production Grows Strongly, but Not in Manufacturing
Norwegian industrial production surged in June, rising 7.6% month-to-month after falling by 0.9% month-to-month in May. The gain was lifted by utilities output and by a screamingly strong increase in mining & quarrying output. Output in manufacturing fell by 1%, in sharp contrast.

A bifurcated economy: Sequentially overall output is rising by 8.2% year-over-year and at a 32% annual rate over the last three months. Both utilities & mining are showing output up at a fantastically strong pace over the most recent three months, driving overall industrial production up at an extremely strong pace. However, for the same three-month period, manufacturing output has been weak, falling at a 3.7% annual rate while rising only 0.7% over 12 months.

Moderate to weak manufacturing: In June, manufacturing output fell by 1%, with consumer goods output falling by 1.5%, intermediate goods output rising by 3.6%, and capital goods output falling by 1.5%. Sequentially, the main manufacturing sectors are all showing tempered rates of increases. The lone exception is intermediate goods where there is an acceleration underway, with output rising 1.3% over 12 months, at a 4% annual rate over six months, and at a 6.5% annual rate over three months. Capital goods output is weak, falling at an 8.6% annual rate over three months. Consumer goods output is falling at a 0.4% annual rate over three months, led by a sharp decline in consumer durables, which are falling at a 29% annual rate over three months. The Norwegian economy is undergoing substantial crosscurrents in manufacturing. Manufacturing is feeling some amount of duress while a boom is going on in utilities and mining & quarrying.

Over this period, inflation in Norway has been extremely well tempered, with the HICP for June falling by 0.4% and the core HICP falling by 0.2%. Headline inflation is decelerating from a 2.6% pace over 12 months to 2.2% over six months, and it is falling at a 0.8% annual rate over three months. Core inflation is even well-behaved, rising 2.8% at an annual rate over 12 months and six months, and then rising at only a 1.6% annual rate over three months. Despite the strong growth in Norwegian output, there's no sign of overheating since the manufacturing sector is weak and the strength is lodged in mining & quarrying and utilities. The inflation environment remains tempered. Norwegian manufacturing output shows that all sectors have recovered beyond their 2020 pre-COVID levels except consumer durables. Durables output is still 12% below the output levels that had prevailed in January 2020; the rest of the sectors are showing, for the most part, reasonable increases in output over that period of time, ranging from moderate to quite strong—strong in the case of utilities and mining. Capital goods output is also up 21% from its January 2020 level. The Norwegian economy is experiencing some mixed patterns.

In the quarter to date, which is now the complete second quarter, overall output grew by 6.4% at an annual rate, with manufacturing growing at a modest 2.6% annual rate. Consumer goods output grew at a 2.6% annual rate, intermediate goods output grew at a 5.4% annual rate, and capital goods output grew at a skinny 0.1% annual rate. In the quarter, inflation rose at a 0.9% pace, with the core HICP up at a 2.8% annual rate. Obviously, as this quarter was ending, conditions have progressed differently as we're now looking at extreme strength in overall industrial production, declines in manufacturing, and moderation of inflation. These trends will have to be watched closely as things are changing in Norway.
by:Robert Brusca
|in:Economy in Brief
Europe| Sep 01 2026
EMU Inflation Is Too High but Not Jet-setting
There's a good deal of concern about the development of inflation globally and across individual areas where central banks are making decisions on what to do with policy. In the euro area in August, the headline rate rose by 0.4%, with the core rising by just 0.2%. The three-month inflation rate for headline HICP inflation is 3.3% annualized while the pace for the core is only 2.4% annualized. That's excessive relative to the 2% target but not a particularly strong acceleration for inflation. It's not the kind of number that says to the ECB that it has to raise rates right now.

Sequentially, the headline rate goes from 3.3% to 4.3% to 3.3% over 12 months, six months, and three months on an annualized basis. These are all too high and too uncomfortable, topping 3% and in one case topping 4%. These are the kinds of numbers that require some kind of remedy. However, core inflation posts a very different set of numbers that go from 2.4% to 2.5% to 2.4% over 12 months, six months, and three months, again all annualized. These numbers show inflation skimming too high over the target but not even half a percentage point too high. It’s the kind of thing that a central bank might be willing to continue to tolerate for a while. There's nothing about a 2% target that says 2.4% is an outrageous miss and requires a monetary policy remedy. On the other hand, the fact that that's happening and the headline rate is cruising at a much higher pace over the top of the target may be something that will cause the central bank to say, well, core inflation is too high and I'm also concerned that headline inflation is going to pull it even higher, so maybe it is time to act. These sorts of considerations will keep the market a little bit off balance and wondering what the ECB is going to do.

The Big Four economies in the monetary union all have year-over-year inflation rates for the headline that are excessive compared to the target set for the entire community. France has the lowest 12-month headline pace at 2.7%. Spain has the highest at 4.5%. Over three months, both France and Italy run headline inflation near a pace of 1.5%, while German inflation runs hot at 3.7% and Spanish inflation sizzles at a 7.0% pace.

Once again, however, core is a better-behaved series, at a 12-month pace of 2.9% for Spain, 1.4% for Italy, and with German ex-energy inflation up at a 12-month pace of 2.2%. Over three months, the ex-energy or core paces run at 0.4% for Italy, 2.0% for Germany, and 2.6% for Spain.

Bottom line European inflation is too high. The inflation rate in the community appears to be irregular, just judging by the Big Four countries and all their variation. Core inflation is mostly contained, but the headline is not. Still, core inflation is running mildly hot. It is decision time for the ECB. The safe course would seem to hike rates again to be sure. But nothing here is clear. Stay tuned.
by:Robert Brusca
|in:Economy in Brief
Europe| Aug 31 2026
EMU GDP in Member Countries: Some Minor Revisions
Growth among the eleven reporting EMU countries continues to be mixed. Growth in EMU is stable enough but modest at 0.5% to 1.2% over four quarters when assessed over the last four quarters. Quarterly results are more volatile, of course. Median annual growth is 1.3% to 2.1%.

Mixed Result on Growth In Q2, five of these eleven countries showed lower growth based on annualized quarter changes, while three showed weaker growth quarter-to-quarter based on four-quarter rates of growth. Belgium, Denmark, and France were weaker based on four-quarter growth rates. Growth in Spain was unchanged at 2.7%. Danish growth slowed to 4.6% from 6.1%.

Assessing Rates of Growth The change in growth rate assessment is useful but never quite definitive, as you can see from the still-strong, although slower, Danish pace of growth. 4.6% is less than 6.1%, but it is still quite strong, hardly a problem. Similarly, Ireland shows better growth, but that is an ‘improvement’ to -5.6% from -13.2%, an improvement and a sharp one, but still chillingly weak. Of course, Ireland, with a preponderance of multinational corporations headquartered there, shows some accounting fluctuations that are not that representative of a real macroeconomic impact on the Irish economy but can have a big impact on reported GDP. Ireland logs the only negative growth rate in the monetary union over four quarters, with Belgium the next weakest at 0.5%, and Germany and Italy at 1%.

The Big Four Economies The four largest EMU countries with GDP pooled have run an annual growth that has been quite steady around the 1% mark (0.9% to 1.1%). The rest of the EMU has had a more volatile growth rate. Pooling the remaining countries’ GDP performance yields growth rates over fourth quarters ranging from -0.9% to +2.1% over the last four quarters.

Within EMU The table chronicles growth rates for 11 EMU members plus the United Kingdom, the United States, and Japan. Among these 14 countries, year-over-year growth rates on data back to 1998 show only five countries with GDP growth rates ranking over four quarters above 50%; rankings above 50% put them above their median for that period. Those five countries are Spain, Finland, Italy, Portugal, and Denmark. While Spain and Italy have rankings above their medians for the period, German growth ranks at only 45.7%, and French growth is quite weak at a 17.4 percentile standing, marking a split in performance among the Big Four economies.
by:Robert Brusca
|in:Economy in Brief
Sweden| Aug 24 2026
Sweden’s Housing Market Shows Signs of Life
Sweden ended its rate cutting back in the third quarter of 2025. Since then, housing prices have drifted higher. However, housing activity, starts, have had a minor bounce from their lows but no real recovery. Starts are still well below their 2015-2022 levels. But the pace of decline has slowed and given way to oscillation and stability.

Sweden’s inflation rate has fallen back down to its pre-Covid pace. Inflation is no longer a problem there as the headline and core rates for two consecutive quarters are below the 2% mark and look comfortable there. House prices have stabilized. There has not been a year-on-year drop in house prices since 2024-Q1.

Housing completions in this environment have a one-quarter bounce. It’s too early to call this a bottom in completions, but we do have what looks like a spike low in completions. With housing prices creeping back up, having risen for three quarters in a row, the market is beginning to look firmer.

The economy is back in gear, with industrial production rising as of the end of 2024 and logging growth rates of over 4% year-over-year, even after slowing from its rapid recovery from mid-2024 to 2025-Q3.

Sweden shows the signs of having a soft landing in the wake of all the Covid excesses, even with the post-Covid War in Ukraine and the more recent bottlenecks for energy and other supplies in the Strait of Hormuz. Only time will tell if the authorities can continue this run of good policy results.

Monetary policy seems well positioned, with the policy interest rate less than a percentage point above the inflation rate but more than one and one-half percentage points above the core rate of inflation. Interest rates in Sweden were last dropped in late 2025.

Sweden is less affected by the complications in the Middle East and principally uses fossil fuels in its economy to fuel transportation. Apart from that, it has a rich resource of hydro, nuclear, and green energy. This helps give it a buffer against the rollicking prices in the global energy sector and to buffer it from some of that uncertainty.
by:Robert Brusca
|in:Economy in Brief
Global| Aug 21 2026
Flash S&P PMIs Show Ongoing Improvement Amid Unsettled Geopolitics
The S&P PMIs show a mixture of strength and weakness in August. However, the readings on average show the composite stronger in August than in July, the manufacturing readings stronger in August than in July, and the services readings slightly stronger in August than in July. That suggests there's broad sectoral improvement underway. However, there's still a great deal of irregularity. The composite indexes rose in five of the eight early reporting countries, with Australia, France, and Germany showing monthly weakening. Despite the weakening in France and Germany, the European Monetary Union showed better conditions on balance. Manufacturing sectors improved in August except for the United States, India, and the United Kingdom. France and Germany also had the only weakening service sectors in August.

Apart from August, the three-month, six-month, and 12-month averages, compiled only on completed data through July, show a bit more weakening. Five countries show composite readings weakening over three months compared to six months, with only the U.S., India, and Australia getting stronger. Over six months, all of the reporters’ composite values are weaker compared with their 12-month values on average, with only Japan getting stronger. For 12 months compared to 12 months ago, all the reporters are stronger and they're stronger on almost all of their readings except for the U.S. The U.S. composite is weaker over 12 months on average, compared to 12 months ago, and its service sector is weaker. The EMU composite is stronger, but the service sector is weaker compared to 12 months ago.

However, in terms of standings, the queue percentile standings for the group are quite good and have been clearly progressing over recent months. The average composite queue standing is in its 60th percentile. For manufacturing, it's in its 63rd percentile, while for services, the average is only in its nearly 49th percentile, just barely below its historic median. Manufacturing PMIs are on a long climb higher. The composite queue readings are dragged down by services, particularly in India but also in Germany and France. The U.K. and Japan have readings above 50 but by the thinnest of margins. The U.S. has a strong service sector by ranking, in its 80th percentile compared to where it's been since 2021. The next strongest ranking is a 69th percentile standing in Australia, and after that, it's a 57th percentile standing in the EMU. The services reading has been in a trendless oscillation since at least mid-2022.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Aug 20 2026
U.K. Industry Shows Sharp Improvement in CBI Survey
The U.K. CBI (Confederation of British Industry) survey saw orders advance to a diffusion reading of -25 in August from -45 in July. Despite this huge shift, the percentile standing of the August measure is only in its 27th percentile. This ranking emerges after the third largest month-to-month change in the orders reading since late 1993.

In contrast, export orders made their largest monthly change in their month-to-month reading in August, and that boosted the diffusion reading to zero in August from -33 in July. This has impact of boosting the rank or queue standing to its 86.9 percentile, a strong historic standing. We are seeing strong increases in orders in August. These improvements are not always boosting the readings into a zone of strength or even normalcy, but they have taken the readings out of the extreme weak tails of their respective distributions.

Looking ahead... The output volume diffusion reading, looking ahead to the next three months, improved to -7 in August from -30 in July. The month-to-month change in the reading is the seventh largest back-to-back improvement in that series. The expected output reading, however, is still only in its 16th percentile despite the extremely large monthly change.

On the other hand, the price expectations jumped to 22 in August from 11 in July, logging the 19th largest month-to-month increase, again on data back to late 1993. Average prices rank in their 84th percentile. So, their recent sizeable rise has pushed them up to the high distribution levels. Manufacturing output, which lags the CBI survey, is still much weaker and draws from a weaker period, judging from the CBI readings.

Growth seems to have picked up, but unfortunately so has inflation. The U.K. CPI-H measure rose by 0.6% m/m in July. It is now on an accelerating plane from 3.1% over 12 months to 3.4% annualized over six months to an annual pace of 3.7% over three months. Core inflation has been excessive and has popped over three months.

The U.K. situation remains a difficult one. Economic growth has not been very good. The party leader and labor party PM recently stepped down and has been replaced. Inflation has been excessive for a while. Despite deflating, inflation is moving back up again, and despite the unwind, it did not get back to 2% when it eased.

The pick-up in the CBI index is encouraging, but it is coming with increased price pressures. Relatively more of the improvement in orders is from exports, so the domestic economy is not looking like it will generate much in the way of sustainable inflation. A lot of inflation is still coming from energy, and no one really knows how to handicap that.
by:Robert Brusca
|in:Economy in Brief