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

Europe| Mar 18 2024
EMU Trade Surplus Grows; ports Struggle as Imports Contract
The January trade balance in the euro area surged sharply into a stronger surplus at €28.0 billion, up from €14.3 billion in December, doubling in one months’ time. The 12-month average for the trade balance is a surplus of €8.3 billion. The average over the previous three months is €19.3 billion.

A larger surplus; a smaller deficit The improvement comes about in January through two sources: one is the balance on manufacturing trade where the surplus rose to €47.75 billion from €37.8 billion in December. The average surplus over the last 12 months is €34.2 billion. The second source of improvement is the balance on nonmanufactured goods, a trade balance that is in deficit. That deficit got smaller in January at -€19.7 billion as it improved from -€23.5 billion in December. Over 12 months the average deficit on nonmanufacturing trade is -€25.9 billion. Month-to-month there's improvement on both the manufacturing and the nonmanufacturing balance of the €14 billion improvement, about €10 billion of it comes on the manufacturing side with the rest on the nonmanufacturing side. That occurs with the manufacturing surplus getting larger and the balance on nonmanufacturing goods showing a smaller deficit.

The story of trade improvement is told by clearly different trends for exports and for imports. If we divide exports and imports into manufactured and nonmanufactured goods (as we did in the description above), we do see some quite different growth rates; however, in both cases the trends work to produce an improved trade balance for the euro area.

Trade in Manufactures Manufactured goods show exports fluctuating around a slight increase or little-change, falling by 1.2% over 12 months, rising slightly over six months, then falling at a 2.1% annual rate over three- months. Compare this to manufacturing imports where imports fall 13.8% over 12 months, fall at a 20.1% annual rate over six months, and then fall at a 27% annual rate over three months. While exports are floundering and holding around the zero-growth mark, imports are clearly plunging on all horizons with the import growth rates getting weaker over more recent periods. These trends obviously lead to an improved trade performance as the trade balance moves into larger surplus on more or less unchanged manufacturing exports amid plunging manufacturing imports.

Trade in Nonmanufactures Turning to nonmanufacturing trade on the export side, we see exports growing and accelerating over the different horizons, from 4.4% over 12 months, to a gain at a 33% annual rate over six months, to an increase at a 53% annual rate over three months. Nonmanufacturing imports, on the other hand, show persistent declines, however, amid withering weakness. Nonmanufacturing imports fall by 23.9% over 12 months; that's reduced to a decline of only 0.3% at an annual rate over six months, although it rebounds to a decline of 12.2% annualized over three months. Nonmanufacturing imports are declining on all horizons as the tendency for decline diminishes over more recent periods; however, this effect is being swamped by exports where the exports of nonmanufacturing goods are growing and are growing more strongly over shorter periods.

The two largest EMU Nations Looking at the two largest economies in the European Monetary Union, we see German exports growing over 12 months, six months, and three months and growing stronger over those horizons. The same trend is true of French exports which grow on all horizons and grow stronger as well. German imports contract over all horizons and French imports contract over all horizons. We see reinforcing trends in both Germany and in France behind the overall Monetary Union trends.

The U.K. The U.K., a European economy that's not a member of the monetary union or the European Community, shows exports and imports both declining over 12 months and over six months, with both trade flows improving over three months and with exports being slightly stronger over three months.

Other EMU Exports Export trends for Finland, Portugal, and Belgium - all of them monetary union members - show different patterns. For Belgium, exports decline on all horizons and are weaker over three months than over 12 months. For Portugal, exports decline over 12 months but gain pace and rise over six months and over three months. In Finland, there are double-digit declines in exports over 12 months and six months, and roughly unchanged performance over three months.
by:Robert Brusca
|in:Economy in Brief
Japan| Mar 15 2024
METI Service Sector Reading Advances as Japan’s Readings Turn Mixed
A cacophony of trends and readings for Japan Japan's surveys for January show broad weakening despite an improvement in the METI service sector reading that rose for the second month in a row. Readings are varied, but they oscillate in a range of moderation to weakness. There is scant evidence of any strength across sectors in these various surveys using different methods of assessment and over various sectors or industries.

The Teikoku construction index improved month-to-month in January. The economy watchers index showed an improvement in employment and in its future index. For the economy watchers survey, those are three improvements in a row for employment and for the futures index. However, there's more weakening going on in January than there is strengthening.

The METI sector indexes showed industry weakening to a 97.6 reading in January from 105.5 in December. The Teikoku indexes show weakening month-to-month in services, wholesaling, retailing, and manufacturing, while in December, retailing, wholesaling, and services had improved monthly. In the economy watchers index, there was weakness in the headline and the retail sector; eating & drinking establishments and services sector readings also eased in January but all four of those surveys came after improvements in December- the economy watchers index itself had increased in each of the two previous months.

The emerging picture for Japan, therefore, is one with mixed performance across the surveys. We can also evaluate these statistics by looking at the growth rankings; for example, the year-over-year ranking of growth rates for indexes or for diffusion levels. The economy watcher diffusion indexes’ growth rates are above historic medians, except for the retail sector, which has a 44-percentile ranking. However, the rankings are not very robust with the highest being the future index with the 65-percentile ranking. The economy watchers index itself has only a 51.7 percentile growth ranking. The ranking on the levels of economy watchers diffusion indexes are higher in the 70th to 80th percentile range except for employment, whose diffusion level standing is below its historic median at its 48.3 percentile.

The Teikoku indexes also are diffusion indexes. We evaluate them on their year-over-year growth first; manufacturing and wholesaling both have growth rankings below their historic medians. The other components have rankings in their mid to low 60th percentiles. If we rank these diffusion indexes on their levels, the manufacturing index has only a 39.5 percentile standing; the rest of the sectors have standings that are in their 60th percentile decile-the exception is construction which is at its 55.8 percentile.
by:Robert Brusca
|in:Economy in Brief
Spain| Mar 14 2024
Spanish Inflation Accelerates
Spanish headline inflation has clearly hit a sticky spot and stopped its tendency to fall. Inflation peaked in 2022. Headline inflation is now clearly up from its low point of early-2023 and moving sideways at a higher level above the 2 1/2 percent growth rate.

The Spanish HICP rate for February backed off from its January spike, growing by 0.4% in February, but that was after a 0.9% increase in January. As a result of that clustering of strong price gains, inflation is spurting. Spain’s inflation on the HICP shows 3% over 12 months, a gain over six months at a 4% pace, and a gain over three months at a 5.8% pace. That's a clear pattern of acceleration and of course a level of inflation on all horizons that's higher than the benchmark 2% pace that the ECB sets for the community as a whole.

Spain’s domestic CPI shows a similar pattern with the CPI up by 0.3% in February after a 0.8% gain in January. CPI inflation is up 2.8% over 12 months; that gain rises to a 3.4% pace over six months and a 4.8% pace over three months. Spain’s inflation rate is clearly climbing whether we look at the HICP measure or the domestic CPI measure.

Core inflation is usually better behaved because it omits the volatile inflation elements of the headline gauges. Spain's core is up by 0.4% in February after rising by 0.5% in January. The 12-month core inflation rate is at 2.5%; that pace decelerates to 1.7% over six months but then it rises, gaining to 4.8% at an annual rate over three months.

Spain's inflation rate over three months whether measured by the HICP or CPI headlines, or the core is clearly excessive. Over six months inflation is excessive on both headline measures, but the core comes in at only 1.7%. Over 12 months Spain's inflation is between the lower 2.5% core increase and the higher 3% increase on the HICP.
by:Robert Brusca
|in:Economy in Brief
Europe| Mar 13 2024
EMU Shows Ongoing IP Contraction…Yet Progress, Too
The bottom line on this report is not that it is mixed. The headline on this report is meant to reflect the fact that industrial production clearly continues to be weak, clearly continues to decline; however, the pace of decline shows signs of easing- both in terms of some of the sequential growth rates and in terms of the performance of the manufacturing PMI for the Monetary Union. The overriding message from the report is that conditions remain weak and are not recovering. However, there is a significant side-bar message here that things are not worsening and there are some signs of subtle improvement amid ongoing contraction that's the more complicated or sophisticated message from this month's report.

MFG PMI helps to sort out complicated assessments Overall industrial production declined by 3.2% in January after two straight months of increasing. Manufacturing output performs just about the same. However, the message from manufacturing PMI statistics is that manufacturing PMI indexes are higher month-to-month in January, in December and in November; there are higher sequentially over six months compared to 12 months and over three months compared to six months. However, the other message from the PMI gauges is that the PMI manufacturing statistic is below 50 on all those months and all those sequential horizons. So, there's a more complicated story that is told rather clearly by the PMI that tells us that PMIs are below 50 yet they have generally been improving.

For growth rates, industrial production shows manufacturing output falling 7% over 12 months reducing that to a 3% annual rate drop over six months and to a 4% annual rate drop over three months. From 12-months to six-months, the rate of decline is reduced, but then from six-months to three-months the rate of decline accelerates slightly.

Sector stories- Manufacturing sectors show consumer goods output is improving sequentially, moving from a 3.7% drop over 12 months to a small rise over six months to a 7.7% annual rate increase over three months. Durable goods, however, show a steady menu of declines over 12 months to three months without a clear trend. Nondurables output shows a decline over 12 months, then increases over three months and six months, but again, without a clear accelerating trend – but there is still an improving trend. Intermediate goods show an accelerating trend with output falling 2.6% over 12 months, trimming that decline to a -1.5% pace over six months, and then logging an increase at a 1.8% annual rate over three months. However, capital goods, a relatively important sector in the Monetary Union, show worsening conditions. Capital goods output falls 9.3% over 12 months, falls at a 9.5% annual rate over six months, and then accelerates the drop sharply to a -16.1% annual rate over three months.

Quarter-to-Date- Quarter-to-date (QTD) statistics for industrial production are, of course, tentative with only one month's worth of data for the new quarter in place. But here we are looking at the growth rate of the one-month new quarter index against the quarterly average of 2023-Q4. We see a double-digit decline in industrial production QTD at -11.6% pace and a decline in manufacturing at a -17.4% annual rate.

Manufacturing Production across the Monetary Union- Turning to the performance across the Monetary Union and other European early reporters, we see the output is accelerating in a minority of members in January. That's a weaker performance from the 69% proportion of accelerations reported in December, but it's more similar to the 38.5% acceleration rate logged in November. Sequentially output accelerated over 12 months in 45.5% of the monetary union members that stepped up to 69% over six months and then backed down to only 27% showing acceleration over three months. Of the recent three months, conditions are quite weak with a number of countries showing very substantial negative numbers and only Spain and Portugal produce strong positive growth rates over three months as well as six months. Quarter-to-date growth across countries shows declines in most countries with the exceptions being Spain, Portugal, Greece, and Belgium.

Growth rate rankings in historic context- The far-right hand column ranks growth by sector and by country by comparing the current year-over-year growth rate and industrial output to historic record back to 2007. On that timeline, all the aggregate monetary union growth rates are extremely weak. In fact, EMU sector growth rates are below the 15th percentile except intermediate goods which has a 31-percentile standing. Among EMU members, only two countries have growth rates that are above their historic medians (that is above a ranking at the 50th percentile) and the exceptions are Spain and Greece. For the other three reporting European economies (not EMU members), the U.K. growth rate has a 64.4 percentile standing, Sweden has a 53.7 percentile standing, and Norway has a 31.7 percentile standing. These standings are generally higher and more moderate than what we see among Monetary Union members.
by:Robert Brusca
|in:Economy in Brief
Germany| Mar 12 2024
Germany’s Inflation Reduction; The Thrill Is Gone?
Globally inflation statistics peaked sharply during the COVID, having since been running down and running down at a pace faster than what central banks had expected. But suddenly, this unwinding of inflation appears to have hit a rough patch and the pace of decline in inflation seems to be slowing or even reversing. German inflation statistics for February are inconclusive on this thought. The ECB-targeted HICP rate in Germany rose 0.2% in February with the core up by 0.4%. Germany's own domestic CPI gauge rose by 0.2% in February with its excluding energy measure up by 0.3%. On the face of it, there's nothing glaring about the monthly inflation data. Inflation diffusion, in fact, is quite tempered with month-to-month inflation rising for only 27% of the categories indicating a continuing tendency for inflation to decelerate.

However, sequential inflation data over 12 months, six months and three months show trends that are more equivocal. For Germany, the HICP index rises 2.8% over 12 months, slows to a 1.6% annual rate over six months, then rises back to a 2.9% annual rate over three months – indicating an acceleration over three months that takes it above its 12-month pace. The core measure for the HICP is up 3.6% over 12 months that tails to 2.5% annual rate increase over six months then jumps to a 4% pace as annualized over three months. The core for the HCP is uncomfortably high.

German domestic inflation shows the headline up 2.5% over 12 months, tailing to a 1.5% annual rate over six months then bouncing back to 2.4% annual rate over three months, reminiscent of the pattern that we see for the HICP headline. The German domestic CPI excluding energy rises 3.1% over 12 months, decelerates to a 2.6% annual rate over six months but then jumps to a 3.2% annual rate over three months, once again, like the pattern for the core HICP, but not as draconian in terms of the three-month rebound. Still, there's enough pressure strength and rebound over three months to be off-putting to the monetary authorities.

German inflation diffusion shows inflation accelerating at 72.7% of the categories over three months; that's up sharply from 36.4% accelerating over six months and 27.3% of them accelerating over 12 months compared to the previous 12 months. The notion of inflation accelerating is therefore a fairly broad-based over three months, but it's also a relatively new event.
by:Robert Brusca
|in:Economy in Brief
Japan| Mar 11 2024
Japan Recession: Never Mind; ‘Down’ Revised to ‘Up’ and Life Goes on
Japan's GDP in the fourth quarter was revised from a decline to an increase of 0.4%, erasing the two consecutive quarters of negative growth that had previously been in play. With that development, the notion of a ‘rule-of-thumb’ recession in Japan has been set back on the sidelines. Still, growth in Japan fell at a 3.2% annual rate in the third quarter and only rebounded by 0.4% at an annual rate in the fourth quarter. The GDP revision is a pretty thin reed on which to hang optimism.

Year-over-year GDP growth in Japan is at 1.3%; that's down from a 1.6% year-over-year pace in the third quarter and down from a 2.3% pace that was logged in the second quarter. It’s not recession, but it is an ongoing loss in momentum.

In fact, Japanese growth, looking at the year-over-year rates averaged over a five-year period, comes in at only 0.2%, indicating what an extremely weak period this has been for the evolution of Japan's GDP.

Turning back to the quarterly data, real private consumption has fallen for three quarters in a row; this is not a good development. In the fourth quarter private consumption in real terms fell at a 1% annual rate, in the the third quarter it fell at a 1.4% annual rate, and in the second quarter, it fell at a 2.7% annual rate. If we take more perspective, Japan's private consumption fell by 0.5% year-over-year in the fourth quarter and fell by 0.1% year-over-year in the third quarter. Private consumption which is the bulk of GDP (53%) is extremely weak in Japan in the fourth quarter. Public consumption (another 21% of GDP) didn't help at all; public consumption fell by 0.7% at an annual rate after rising by 1.1% in the third quarter- but that had followed a 0.4% decline in the second quarter. The consumption portion of the Japanese GDP equation is quite weak.

The investment side shows some bounce back in the fourth quarter as gross fixed capital formation advances at a 4.2% annual rate in the fourth quarter after declining for two quarters in a row before that. Gross fixed capital formation is now up 2.2% over the last four quarters, a positive development. Investment on plant and equipment rose by a strong 8.4% at an annual rate in the fourth quarter, offsetting declines in the previous two quarters - a decline at a 0.5% annual rate in the third quarter and a decline at a 5.6% annual rate in the second quarter. This quarterly series has been particularly volatile as you can see from data in the table. However, if we look at year-over-year growth, the year-over-year percent change in plant and equipment are up at a 2.5% pace in Q4, an improvement from a 0.9% annualized drop in the third quarter; that drop is preceded by a string of increases.

Housing in Japan shows weakness with a decline of 3.9% at an annual rate in the fourth quarter and a decline at a 2.5% annualized rate in the third quarter after a series of quarterly increases and year-over-year gains for three quarters in a row. But residential investment is up by just 0.4%, annualized in the fourth quarter.

GDP-net exports turned positive in the fourth quarter after posting a small negative number in the third quarter and having put erratic numbers up over the last six quarters. Exports put in a good quarter in Q4, rising at a 10.7% annual rate after a 3.8% annual rate increase in Q3 and a 16.2% annual rate increase in the second quarter. Imports generally lag-behind exports, rising by 6.9% at an annual rate in the fourth quarter, more or less pacing with exports in the third quarter at 4%, and then declining sharply to fall at a 13.5% annual rate in the second quarter. Year-over-year quarterly exports are up 3.7% in the fourth quarter compared with 2.6% decline in imports. Imports are falling year-over-year for three quarters in a row while exports are putting in consistent moderate rates of real growth.

Domestic demand in Japan fell by 0.2% in the fourth quarter after falling by 3% in the third quarter and falling by 2.5% in the second quarter- all of these are annual rates. These three straight declines in domestic demand clearly are huge challenges for GDP looking ahead. Domestic demand in Japan is also lower year-over-year by 0.1% in the fourth quarter and by 0.1% in the third quarter; these numbers compare with 1% gain in the second quarter of 2023.

Domestic demand in Japan is weak; in fact, exports are playing a key role and holding GDP growth up. Exports help to contribute to a positive stimulus from the trade balance that boosts growth. However, it's surprising that even with domestic demand down by 0.2% at an annual rate in the fourth quarter, imports in real terms still increased by 6.9%.
by:Robert Brusca
|in:Economy in Brief
Canada| Mar 08 2024
Canada’s Job Situation Remains Firm
Canada's job market turned out 41,000 jobs in February compared to 37,000 in January and about 7,000 in December. Job creation has gradually stepped up. Sequential trends show the job growth has been quite stable in Canada with employment creation over three months averaging 28,000 per month, six-month gains average 31,000 per month, and over 12 months, gains are averaging 31,000 per month. Year-over-year employment has increased 1.8% in Canada.

Goods sector job creation has slowed and turned to contraction. Goods sector jobs have declined in February, and they've declined on balance over three months, six months and 12 months- this is an enduring feature of the Canadian economy right now. Despite goods sector weakness, service sector jobs in the Canadian economy are quite robust and healthy with the 12-month gain averaging 34,000 per month, a six-month gain of nearly 35,000 per month, and the three-month gain averaging 49,000 per month.

Looking at recent months, the percentage of categories showing jobs accelerating is at 52.6% in February compared to 63.2% in January and 57.9% in December. These statistics show that jobs are accelerating consistently in more sectors than they are decelerating. Looking at sequential data, jobs accelerate over 12 months in only 42% of the categories; over six months that statistic improves to 47% of categories, but still signals more categories seeing employment reductions than increases. However, over three months the percentage of sectors showing employment acceleration rises to 57.9%, a solid reading that shows substantially more acceleration and job creation than deceleration.

Over three months, eight of the categories in the table- out of 19 total including the headline in major sectors as separate observations- show declines. Over six months, seven of these categories show declines. Over 12 months, six categories show declines, with one category unchanged. These statistics underpin the notion that job declines are relatively rare across industries. However, that's not to deny that the goods sector has more chronic and special kind of weakness in progress that has been there for at least the last year. Persistent recurring goods sector job losses stated around November 2022- but average 12-month declines that are negative have been a feature for only two months in a row.

Canada's unemployment rate has fluctuated recently. It rose to 5.8% in February from 5.7% in January. January saw the unemployment rate fall to 5.7% from 5.8%. Over 12 months the unemployment rate in Canada averaged 5.5%; over six months it moved up to 5.7%; over three months it averages 5.8% which is where it sits in February. The consistent firm levels of job growth from 12-months to six-months to 3-months have not been sufficient to hold the unemployment rate at the 5.5% mark. However, over the last six months the unemployment rate has been relatively stable fluctuating between 5.7 and 5.8%. In this cycle, Canada's unemployment rate reached a low point at 4.8% in July 2022; however, it quickly rebounded the very next month to a rate of 5.2% and after that sunk to a low of 5% in January 2023. It did not revisit that 4.8% low point again. On data back to 1990, the unemployment rate of 4.8% is the low for Canada's unemployment rate. The current rate of 5.8% that has crept up, is still a rate that's in the lower 10-percentile of all unemployment rates on that same timeline back to 1990.
by:Robert Brusca
|in:Economy in Brief
Germany| Mar 06 2024
German Trade Surpluses Rising- Exports and Imports on an Upswing
German trade showed a monthly supply widening to €27.5bln from €23.3bln in December. Goods exports advanced by a strong 6.3% month-to-month in January as imports also rose by a strong 3.6% even though imports trailed exports by a large margin.

However, those are simply monthly data and monthly trade figures ae quite volatile. The table also offers perspective with 12-month, 6-month and 3-month growth rates also presented. On that profile, exports show strong acceleration in train with the 12-month growth at 0.3%, moving up over six months and culminating in a very strong 23% annualized pace over three months. Import trends do not exhibit their monthly strength of January sequentially. Imports fall by 8.3% over 12 months, fall slightly more slowly over six months, and then trim that pace of decline to -6.2% over three months.

The German export progression speaks of a recovering global economy. We have seen the Global PMI data stabilizing and slightly improving in recent months. Germany exports are rising on the back of that development. But German imports are contracting and doing so over each of these horizons.

Import weakness reflects the weakness in Germany’s economy. A new forecast from the IFO underscores the reality of that weakness. The IFO outlook sharply downgrades its own previous prediction for German growth. The institute trimmed growth outlook for this year to 0.2 percent from 0.9 percent. Its projection for 2025 was lifted somewhat to 1.5 percent from 1.3 percent.

The IFO offers up a melting pot of reasons explaining why the outlook is for further weakness. The IFO warns that there has been consumer restraint, high interest rates, government austerity in Germany, and a weak global economy in addition the higher prices brought by inflation have combined to damp growth and reduce the IFO outlook. Still, the IFO looks for inflation to slow and drop back into its target in 2025.

The table offers up-to-date nominal export and import figures as well as a spectrum of more detailed export and import trends as well as data expressed in real terms. For comparison, the table offers one-month lagged real data along side the more detailed lagged nominal data.

The sequential growth of the lagged nominal data vs. the unlagged data show a huge differences as three-month export growth runs at a 23% annual rate, but when lagged by one-month that some growth rate drops to -4.2%. The view of exports strengthening sharply is a very new phenomenon. The same comparison with imports also shows much weaker import growth on a lagged basis. When we look at the real flows near the bottom of the table, we find the real export and export trends mirror closely the lagged nominal data referred to above. The real data do not embrace the same degree of rebound and growth as the up-to-date nominal data at this time.
by:Robert Brusca
|in:Economy in Brief
Global| Mar 05 2024
Composite PMIs Mostly Improve
Composite global PMIs in February show more widespread improvement than deterioration. Only 6 of 24 reporting jurisdictions show composite PMIs below 50 indicating contraction. Only 36% of the reporters are slowing in February, month-to-month; that compares to 40% in January, and 36% in December.

If we look at the average tendencies over three months, six months, and 12 months, we see that the number of jurisdictions contracting varies between 7 and 10 over these three horizons. Looking at the tendency for slowing over 12 months 56.5% of the reporters slow compared to 12-months ago, over six months 87% slow compared to their values over 12 months, and over three months only 30.4% slow compared to their values over six months. There's a clear tendency for global composite PMI readings to improve.

The data show that the advanced economies are most uniformly getting better; the most advanced economies are the top panel of the table. Of the six jurisdictions, five of them are getting better in February, six are getting better in January. Over three months all six of them are getting better and this is after all six of them worsened over six months.

However, there is also more consistent weakness among the developing economies particularly for the Monetary Union, for Germany, and for France. For those 3 jurisdictions, the readings are persistently below 50 over the last three months as well as over three months on average, six months, and 12 months. Italy has some sporadic readings below 50; Spain keeps its composite readings above 50 on all those timelines; the U.S., also among the advanced economies, has readings above 50 on all those horizons. The only other group that shows the preponderance of readings below 50 is a scattering of countries in Africa: Zambia, Egypt, and Kenya.

The queue standings that rank these current standings over data from the last four years show persistent positive rankings below the 50th percentile for four of the six advanced economies in the top panel; these include the U.S., the Monetary Union, Germany, and France. Again, only Africa has a clustering of values that are below the 50-percentile mark and those include Zambia, Ghana, Egypt, and Nigeria. Qatar, a Middle Eastern nation, also has a standing below its 50th percentile.

Groupings of countries show the overall averages have been slightly improving over the last three months logging an average of 52.0 in February. The medians have been improving as well and the group median logs a value of 51.3 in February from 12-months to three-months to six-months. The progression is mixed for the average and there is increased weakness on that timeline for the median.
by:Robert Brusca
|in:Economy in Brief
Switzerland| Mar 04 2024
Switzerland Shows the Way Ahead for Low Inflation
Swiss inflation both headline and core as well as HICP and its own domestic index (core and headline as well) have been showing sub-2% inflation for a quite a string of months. HICP inflation is 2% or less for the last seven months in a row with only one exception (2.1% in December). HICP core inflation, not yet available for February, is below 2% for five months in a row with no exceptions. The Swiss domestic inflation headline is below 2% for nine months in a row while core inflation on that index is below 2% for 10 months running. Of course, inflation in Switzerland is ‘always low.’ Over the past 18 years, inflation has averaged 0.5% with a median of 0.3%. While Switzerland is a success story to the rest of the world, Swiss inflation is still in the high side for, well, Switzerland.

These low rates of inflation are on the year-on-year gauge: no funny business- no three-month or six-month calculations and no disregarding special categories to engineer a 2% touch-down as some are trying to do in the U.S. Switzerland gets there with an unemployment rate at 2.2% in January. That unemployment rate is among the lowest 13% of all unemployment rates reported back to the year 2000.

Switzerland is proof that inflation can get back to normalcy. Of course, Swiss inflation had only peaked at 3.3% and its unemployment rate peaked at 3.5%. Switzerland had a much more muted Covid cycle than either the EMU or the U.S. And one cautionary note might be that Swiss unemployment bottomed one year ago and is currently engaged in a very modest up-creep, but an up-creep, nonetheless. The unemployment rate is still below the steady pace it had adhered to before Covid struck in 2019.

Inflation trends in Switzerland are on an accelerating trend but a slight one. Over 3 months, inflation accelerates in two-thirds of the categories in the table, according to diffusion calculations. Over 6 months, we find neutrally as inflation accelerates in only half of the categories; over 12 months, inflation is still broadly decelerating with acceleration present compared to the year-ago pace in only 16.7% of the categories – a marginal proportion.

Monthly inflation shows equivocation with the December diffusion rate at 58.3% (above 50% more categories are accelerating than decelerating), January is at 41.7%, and February’s diffusion is back at 58.3%. Over those recent months, we see some tendency for acceleration to become more prevalent than deceleration. However, this is happening with overall inflation at a very low pace: a 0.4% gain in December- that one is uncomfortable. But that is followed by a flat January and a rise in February of just 0.1% month-to-month. The compounded annualized pace over this three-month period has been just 2%.
by:Robert Brusca
|in:Economy in Brief
Global| Mar 01 2024
MFG PMIs Largely Improve in February
The S&P Global manufacturing PMIs are showing more improvement than deterioration in February. 11 countries in the table show improvement month-to-month while 6 show deterioration. The median reading in February is a PMI value of 50 which is right on the cusp of showing declines in manufacturing. That reading compares to readings of 49 over three months, and six months vs. a reading of 48.8 over 12 months.

In February, 61.1% of the respondents show improvement month-to-month. Over three months, 77.8% show improvement compared to six-months; over six months 72.2% show improvement compared to 12-months; over 12 months 50% show improvement compared to one-year ago. What we see from these metrics is that manufacturing has been on an improving path even though the three-, six-, and 12-month readings linger below the neutral 50% mark.

The queue standings position the February reading in each case among the last four years of monthly observations for each reporting unit. Mexico and Russia show the highest percentile standings on the data they report; Russia is showing a standing in its 98th percentile. Mexico reports a 94th percentile standing. The weakest standings are in Japan that has a 10-percentile standing, China that has a 13.3 percentile standing, and Germany that has a 14-percentile standing. The median standing among all the countries in the table is at the 47th percentile mark which is below ‘50’ telling us that the median reading for this cross section of countries a generally a reading below the individual reporters’ medians over the last four years.

In terms of the averages for various groupings of countries, the U.S., U.K., European Monetary Union, Canada, and Japan show general improvements. The average PMI manufacturing values from a year ago through February show that three-month, six-month, and 12-month values don't show much change, but there is a more significant improvement in February. The BRIC countries also show stasis for the most part for three-, six-, and 12-months, a little more significant move up in February. The Asian average follows that same pattern. In terms of the percentile standings, the more highly developed countries have the lower standing. The U.S., U.K., EMU, Canada, and Japan group is the weakest; Asia occupies a middle ground on the average ranking, and the BRIC countries have the highest percentile queue standings at about the 65th percentile.
by:Robert Brusca
|in:Economy in Brief
Japan| Feb 29 2024
Japan’s IP Falls Hard in January
Weakness is broad across sectors Japan’s industrial production fell hard in January, dropping 7.4% (month-to-month!) after rising 1.2% in December; the December gain followed a drop of 1.3% in November. Japan's industrial output has been unstable for a number of months: manufacturing production has fallen month-to-month in 11 of the last 16 months. During that span, there was only one episode of industrial production rising month-to-month in consecutive months and one of those two months was an extremely small gain of only 0.1%. The changes in industrial output have been choppy during this span. The last five monthly increases in industrial production averaged a month-to-month rise of 2.6% while the last 11 declines averaged a month-to-month drop of 2.1%. These are extremely volatile numbers, and it makes it very hard to pin down an exact pattern for industrial production except that the preponderance of declines makes it clear that the direction is lower, and the speed is ‘too-fast.’

The table makes it clear that there are declines in industrial production over three months, six months and 12 months for all the categories in the table with one single exception - that is transportation output over 12 months. And the progression is to faster and faster declines with exception of utilities output over the last three months that fell at ‘only’ a 5.6% annual rate while declining at an annual rate of 13.8% of six months.

In the quarter-to-date, industrial production is falling overall in manufacturing and in each category at astonishingly strong paces; even utilities output is falling at a double-digit rate early in the first quarter at a 12% annual rate of decline.

The authorities are giving guidance for some recovery in industrial production ahead although that's not particularly reassuring. After such sharp declines, Japan is really staring in the eye a great deal of weakness.

In addition to that, there's not anything queued up that is boosting industrial production in any obvious way for the road ahead.
by:Robert Brusca
|in:Economy in Brief