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

Germany| Feb 09 2024
German Inflation Drops in January
German inflation falls- German inflation fell in January with the HICP headline falling in the month, logging a decline of 0.1% in January after spurting by 0.6% in December. The core HICP wave accelerated to 0.3% in January from 0.2% in December.

German inflation rises- The German domestic CPI inflation measure accelerated to 0.4% in January from a 0% performance in December; the CPI ex-energy rose by 0.3% after rising 0.2% in December.

What really matters in how it’s trending, not its month-to-month gyrations- What you conclude about inflation depends a lot on how you tend to look at it. The year-over-year HICP rose by 3.1% in January, down sharply from its 3.8% pace in December. But then, in November, inflation had been up by only 2.2% so the path for German headline HICP inflation is somewhat jagged. Core inflation that tends to be more stable rose by 3.7% year-over-year in January compared to a 3.7% increase in December. That’s stable, but both of those are down from where inflation had been which is 4% in November, 4.9% in October, and 5.5% in September; that compares to 6.9% in August and a rate of more than 7% in June and July of 2023. Clearly inflation is and has decelerated in the big picture. Core inflation, which does a better job of nailing down the sustainable trend, has flattened out over the last two months. More broadly, a core measure shows German inflation has come down quickly and is hovering in a much lower range than it was in 2023. But at 3.7%, inflation in Germany is still a far cry from the 2% target that the European Central Bank has for the euro area.

Shorter periods show lower HICP inflation- Of course, the German data also show a lot more inflation behaving if we measure inflation over shorter periods. For example, the HICP inflation rate expands by 3.1% over 12 months, at a 1.9% annual rate over six months, and at a 2.5% annual rate over three months. The core HICP rises by 3.7% year-over-year, by 2.1% at an annual rate over six months, and then takes up to a 2.3% annual rate over three months. Inflation is not sequentially deteriorating, but it clearly is on its way lower as the three-month inflation rates for the headline and the core are both markedly below their year-over-year pace. That's a strong score for the concept of inflation unwinding.

Domestic prices are even better- The domestic CPI, the headline shows clearer deceleration from 2.9% over 12 months, to a 2.2% annual rate over six months, to a 1.4% annual rate over three months. The CPI excluding energy on the domestic measure rises 3.4% over 12 months, at a 2.8% annual rate over six months, then steps down to a 2.5% annual rate over three months. The domestic gauge shows inflation much more clearly decelerating and the deceleration takes the inflation pace to a much lower and more benign rate. The headline on a three-month basis is already below the target for the ECB and the six-month pace for inflation is within a stone’s throw of it while for the CPI excluding energy the 2% target is getting in range.

Monthly breadth- Diffusion indexes for inflation measure the breadth of inflation: is inflation accelerating (breadth>50%), or decelerating (diffusion<50%). In January and in December inflation diffusion is over 63%, implying that inflation is accelerating in more categories than it's decelerating. However, the January and December results come after November; in November inflation did not accelerate in any categories! Diffusion was zero so there was a broad slowdown for inflation in November and then a rebound in December and in January.

Sequential inflation breadth- Sequentially inflation diffusion is better behaved over broader periods. Over 12 months diffusion is 27%, over six months it's 36%, and over three months it's back to 27%. On all these horizons, 12-month, six-month, and three-month, inflation is clearly decelerating compared to the period before. In the case of these statistics, we compare 12-month inflation to inflation one-year ago; six-month inflation is compared to 12-month inflation; three-month inflation compares to six-month inflation. Note that the deceleration of inflation is made off the domestic report where both headline and core inflation rates are showing sequential inflation falling.
by:Robert Brusca
|in:Economy in Brief
Japan| Feb 08 2024
Split Decision for the Economy Watchers Index
Japan's economy watchers current index fell to 50.2 in January from a level of 51.8 in December; its queue standing is in its 70.4 percentile, still well above its historic median that occurs at a rank of 50% but more in the range of readings that are indicating relatively firm economic activity.

In contrast, the economy watchers future index rose to 52.5 in January from 50.4 in December. The future index has an 83.8 percentile standing, considerably stronger in ranking than the current index and more clearly at a standing level that indicates more strength.

The Current Index The index showed a decline in the headline as well as declines in six components of the index. The reading for households fell, the reading for the retailing sector fell, the reading for eating and drinking places fell – and fell relatively sharply, the reading for services fell, and the reading for corporations, generally, fell led by a decline in the assessment of nonmanufacturing corporations.

Among the various entries under the current index, the strongest, despite the sharp drop in January, is the 86.6 percentile standing for eating and drinking places, followed by an 80.6 percentile standing for manufacturers. In the case of manufacturers, this likely is the result for Japanese firms benefiting from what has been a chronically weak yen at a time that international activity has begun to strengthen in a number of places. The U.S. economy continues to show stronger growth and the U.S. is Japan's second largest trading partner. However, Japan's largest trading partner is China, and that economy is struggling. The weakest ranking in the current index is for employment; it has a 47.8 percentile standing, leaving it below its historic median; however, the diffusion index still has a reading at 53.3 that improved month-to-month and continues to indicate employment is expanding. While the employment metric is the weakest current reading, housing is in second place at a 59.7 percentile standing.

The Future Index Japan's future index is quite solid with a headline standing at its 83.8 percentile. Three of its components have rankings in their 90th percentile or higher: one is for households at the 90.1 percentile, another is for eating and drinking places at the 98.4 percentile, and a third is for services at the 92.1 percentile. Only one category weakened month-to-month; that was services. It weakened to a diffusion reading of 54.9 in January from 55.2 in December but continues to have a percentile standing in its 90th percentile at 92.1. The weakest future reading is the same as in the current indexes- employment. Employment in the future framework has a 53.8 percentile standing, only modestly above its historic median. The monthly future reading for employment stands at 53.2, up from 52.9 in December.

Momentum Current- The current index shows weaker increases over 12 months than what occurred over 12 months one year ago; that's true up and down the line for components as well as the headline apart from manufacturing that shows a gain. Only retailing shows a decline in diffusion compared with the level of one year ago. Over six months, seven of the categories plus the headline show declines in value. Over three months, five categories plus the headline show declines in their surveyed diffusion indexes. The current index clearly has been losing momentum for a while.

Future- The future index also shows smaller increases over 12 months than it logged over the previous 12 months for all categories except for eating and drinking places, manufacturers, and for employment. Each of those 3 categories show a step up in 12-month changes compared to what they had reported one year ago. Over six months, changes are weaker than they are over 12 months for most components; all components are weaker on balance over six months including the headline except for manufacturers. The manufacturers’ future reading shows persistent acceleration over three months and over six months as well as over 12 months (compared to 12 months ago). The headline reading over three months in the future index shows broad-based increases; these increases are larger than the changes posted over six months for the most part. There is only one exception to that and that's housing; it is weaker on balance over three months.
by:Robert Brusca
|in:Economy in Brief
Germany| Feb 07 2024
German Manufacturing Remains Weak and Is Getting Weaker
German industrial output fell in December by 1.6%, extending the episode of continuous month-to-month declines to the last four months and making it part of a period of an eight-month stretch in which there were six month-to-month declines interrupted by two months when output was stagnant. This has been very difficult stretch for German industrial output. The country depends on its industrial sector for economic leadership and growth. Germany has been a significant exporting country. The war in Ukraine has severely disrupted the functioning of the German economy partly because Germany was also doing a good deal of business with Russia before the war began.

Industrial output trends German industrial output is falling sequentially, at a 3.1% annualized drop over 12 months, a 7.7% annualized drop over six months, and a 7.8% annualized drop over three months. Consumer goods and capital goods sectors show declines over each of these three horizons, but they don't show declines that are becoming sequentially worse. And both consumer and capital goods sectors show smaller annual rates of decline over three months than over 12 months. However, intermediate goods reveal a great deal of weakness as output falls by 4.6% over 12 months; that drop steps up to a pace of minus 15.9% over six months then the drop accelerates sharply over three months logging a minus 22.7% annual rate of decline.

Construction The construction sector has also been logging steady declines in output construction shows sequential and worsening declines in output, falling 1.4% over 12 months but dropping at a 25.5% annual rate over three months.

Other economic measures Manufacturing output shows worsening sequential declines, dropping by 3.9% over 12 months and contracting a 9.4% annual rate over three months. Real sales and manufacturing decline in all three horizons and the drop over three months at a 4.7% annual rate is greater than the pace of drop over 12 months which is kind of -3.4% pace; however, the decline in output in Germany is at a slightly slower pace over three months and over six months. Chair wheel manufacturing orders break this pattern of weakness showing a 2.1% increase over 12 months and a 20.4% annual rate of increase over three months, but this was propped up by some unusual aircraft orders the increase reflects a one- off event that isn't likely to be repeated.

Surveys of industrial activity or expected activity Surveys of the German economy from ZEW, the IFO, and the EU Commission show weakening trends. The EU Commission and the ZEW indexes are diffusion indexes that show negative values over all three horizons and values that are gradually worsening. The IFO constructs indexes and these show manufacturing weakening from 12-months to three-months as well as expectations that are weaker over three months than over 12 months, but they managed to improve slightly from what they averaged over six months.

IP snapshot from Other Europe Industrial production elsewhere in Europe is more mixed in December. French and Norwegian output rise while Spanish and Portuguese output falls. Sequentially French output is accelerating along with Portuguese output. Spanish output is decelerating, transitioning from a growth rate of -5.3% over 12 months to -20% at an annual rate over three months Norway fails to show a clear trend, but over three months output is up by 2.7% at an annual rate, better than its 0.9% gain over 12 months.

Quarter-to-date (completed Q4) In the quarter-to-date, all the German industrial production measures show industrial declines. Real manufacturing orders show a minor increase of 0.4% at an annual rate. Three out of four surveys weakened over the quarter, with the IFO manufacturing expectations the exception, which improves slightly. Quarter-to-date output changes for other European reporters show a decline from Spain, against a small 0.2% increase in France, a small 0.8% increase in Norway, and a substantial 12.9% annual rate increase from Portugal.

Historic assessments of performance The column on queue standings compares the various industrial measures to their appropriate measure of performance evaluated in the context of the last 24 years. Industrial production ranks in the lower 14.2% of its queue of growth rates over this period. The strongest industrial sector is capital goods and that has a 23.8 percentile standing, in the lower quartile of its historic queue of growth rates. Economic signals are weak for construction, for manufacturing, and for real sales; real manufacturing orders that have the distortion of one-time aircraft orders have a very strong 95.5 percentile standing. The various industrial surveys have standings that range from a low 5.2 percentile standing for manufacturing by the IFO, to a high 18.1 percentile standing for the EU Commission survey - all of these are quite weak standings. The growth rates of IP for the other four European countries show France above its median with a 55.1 percentile rank; Norway is close to its median of 50 with a 45.9 percentile rank. Spain and Portugal sport rankings in their 14.8- and 21.5-percentile, respectively.
by:Robert Brusca
|in:Economy in Brief
Global| Feb 06 2024
OECD LEIs Show Very Modest Gains in January
Developed economy trends The OECD leading indicators for January show slight increases of 0.1% for the OECD Major 7 members. Japan shows a flat performance. The United States shows an increase of 0.1%. All of these top-of-the-table metrics are month-to-month changes. They follow identical month-to-month changes posted in January and December for each country or grouping.

Annualized growth rates for these metrics show growth rates over 12 months, six months and three months that reveal acceleration for the OECD 7 group as the 12-month growth rate is -1.9%, the six-month growth rate rises to 0.8%, and the three-month growth rate is a slightly-improved 1.0%. Japan logs negative growth rates for all three periods, but its three- and six-month growth rates are less weak than its 12-month growth rate. The U.S. shows acceleration with the 12-month growth rate at -1.9%, a six-month growth rate of 1%, and a three-month growth rate of 1.3%. The far-right hand column ranks these three OECD units on their index levels; all three regions stand below their respective medians which means they have rankings below the 50th percentile on data back to late-1999.

The OECD prefers to view the signals of its indicators over six months. The next panel on the table looks at changes in six-month averages. On this metric, six-month growth rates from six months ago, are positive for the OECD 7, for the U.S., and for China, while Japan posts a flat performance on this measure in January after rising in December. Sequential growth rates are presented to the right for six-month periods on a point-to-point basis for nonoverlapping rates of growth. The OECD 7 shows accelerating results. Japan shows mixed results. U.S. growth rates show acceleration and Chinese growth rates show acceleration. China’s growth rates are in sync with those from the U.S. The right-hand column offers percentile standings against six-month growth rates for data back to 1999. Each of the OECD metrics shows a standing above its median (which occurs at the 50% mark) except for Japan that has a 45.5 percentile standing. Japan scores as weak when the data are applied using different methods.

The bottom panel in the table presents levels of the OECD LEIs. The level ‘100’ represents normal growth; anything below 100 represents sub-normal growth. The table shows subnormal growth indicated everywhere except in the U.K., Japan, and China. However, the ratio of the current indexes to their value of six-months ago shows improvement everywhere except Japan; only France, the U.K., and China in this lower panel have queue standings for the LEI indexes above their respective medians (50% ranking).

On balance, the OECD indicators in January show some mild improvement underway with LEI indexes at weak levels but beginning to grow at a faster pace.
by:Robert Brusca
|in:Economy in Brief
Global| Feb 05 2024
Composite PMIs Largely Stabilize
Stability settles in for the composite PMIs in January 2024. The average for all 25 members in the table is 50.5 in November; that rises to 51.1 in December and to 51.5 in January 2024. It’s a small set of increases, but the improvements offer a picture of stability. The overall metrics show an average of 51.6 for the composite PMIs over 12 months, which falls back to 50.8 over six months but then rises back to 51.0 over three months. This set of data confirms that these PMI gauges have been floating around in a narrow range for the past year. The medians for these same time periods also show a great deal of stability; there is some slight uptick over the last three months, preceded by considerable stability over 12 months, six months and three months.

PMI values vs. their queue standings The composite PMIs are a weighted average of the manufacturing and service sector PMIs for the various countries/reporters in the table. The average for all 25 countries is a queue standing of 48.7% on an unweighted basis while the median queue standing is a 46.9 percentile standing. The standings which are expressed in percentile terms should not be confused with the PMI gauges that are diffusion gauges expressed as all the rising observations plus half of the unchanged observations as a percent of the total number of observations in each country as reported by participants in each reporting region. With the queue standings, we look at the current PMI diffusion data that populate the table and rank them in their own history for each reporter. Queue standings are presented in only two columns differentiated in presentation with percent signs.

The table shows that in January there are 9 jurisdictions below a diffusion value of 50, which is the breakeven mark (dividing line between expansion and contraction) for the composite compared to 11 being below the composite of 50 in November and December. The number jurisdictions below 50 has fluctuated and a fairly narrow range with 8 averaging below 50 over 12 months, 10 averaging below 50 over six months and 9 averaging below 50 over three months.

Another metric of how conditions are evolving is to look at the changes period-to-period. On that metric, we see that nine of the 25 jurisdictions are slowing month-to-month in January and in December and those are smaller amounts than the 12 that were slowing in November compared to October. The 12-month average shows that there are 13 slowing comparing the 12-month average to 12-months ago. There are 18 slowing comparing over six months to the average over 12 months, marking the 6-month period as the period of the most intense weakness over this past year. Whereas looking at 3 months compared to 6 months, there are only 10 jurisdictions indicating slowing.

The far-right hand column creates percentile standings for all the metrics in the table over the last four years. Only ten of these jurisdictions show standings above the 50th percentile, marking only 10 as having standings above their medians for this four-year period. The average queue standing for these metrics is in the 48.7 percentile, while the median among these is at 46.9 percentile, a weaker figure. Fifteen of the jurisdictions currently are below their medians for the previous four-year period. This represents a reading below their four-year median standing.

On balance, these data depict a global economy that has been through a period of considerable slowing and weakness where conditions are beginning to stabilize and have been stabilizing to various degrees over the last year. The diffusion indexes, viewed broadly, suggest that contraction is somewhat prevalent but not common as there are many fewer jurisdictions below 50 and then above 50 on all horizons. Period-to-period slowing has also lost momentum; it reached its point of peak weakness over 6 months compared to 12 months and has since shed some of that weakening tendency. Percentile standings, however, mark the average and median readings as below their four-year averages and medians. The BIC countries excluding Russia are an exception with averages for their percentile standings at the 78th percentile. Meanwhile, the U.S., the U.K., and EMU regions have queue percentile standings in their 40th percentile, still quite weak. The large, developed countries continue to show some of the weakest performance during this time.
by:Robert Brusca
|in:Economy in Brief
France| Feb 02 2024
French Production Makes Sizeable Gain in December
Industrial production for French manufacturing rose 1.2% month-to-month in December after gaining 0.2% in November and being flat in October. The progression has manufacturing output in France rising from 0.9% over 12 months to a 2% pace over six months to a 16.5% annual rate over three months. This clear accelerating progression is good news for French production. However, quarter-to-date data only show output up at a 0.2% annual rate in the just-completed fourth quarter.

Looking at the components the output of consumer nondurable goods also shows a progression of accelerating output and that is the only component that does that; however, the four components of output consumer durables, consumer nondurables capital goods and intermediate goods show three of them with three-month output growth at a faster pace than 12-month output growth period; the exception is consumer durables that have made a sharp turn lower falling at a 9.2% annual rate over three months compared to a 1.5% gain over 12 months.

The output of autos has been sporadic, but that's not unusual for that sector. Over the most recent three months auto production is up at a 28.2% annual rate compared to -0.8% over 12 months and a sharper -8% annual rate over six months. Consumer spending on autos in France picked up in December after two months of declining, rising by 9.1% month-to-month. Consumer spending on autos is up about 22% over 12 months, then it's up at a 43% annual rate over six months, and then it settles back to a 22% growth rate over three months. This is essentially directionless performance in terms of acceleration, but it does show steady strength and at least an attempt at acceleration over six months on the part of consumers. In many other respects, the French economy has been weak. French GDP has declined in two consecutive quarters, and has annualized year-over-year growth of only 0.6% in Q3 and 0.7% in Q4.

The chart juxtaposes year-over-year industrial production traced out in red against France’s manufacturing PMI that is presented as a level. When the PMI is below 50 manufacturing output is supposed to be declining. We see that from 2020 to early 2021 that rule was obeyed fairly well. Then in later 2021, the PMI stayed at a mid-50 level while output briefly dipped and showed contraction. Later in 2022, the French manufacturing PMI fell below, and then return back to its 50% mark, as industrial output continued to fluctuate between roughly 0 and 3%. In 2023, the PMI decidedly began heading South and moving significantly below the 50% mark down into the mid to lower 40s signaling declines in the manufacturing sector. However, during this period, industrial production moved down to a lower growth trajectory, showing negative growth rates only sporadically. The PMI statistic may not map perfectly into growth, expansion, weakness, and contraction on the part of French manufacturing; however, the two signals are not incompatible either.
by:Robert Brusca
|in:Economy in Brief
Global| Feb 01 2024
Globally MFG PMIs Recover
Globally manufacturing PMI gauges improved in January with only two of the 18 individual reporting countries showing manufacturing worsening. Those two countries were Mexico and Russia. Over three-months compared to six-months, 72.2% of the reporters show the improvements; over six-months compared to 12-months, 55.6% of the reporters show improvements; comparing current values to 12 months ago, half of the reporters show improvements and half show deterioration.

Conditions are getting consistently better over three months, six months, and 12 months in the United States, Mexico, Brazil, Taiwan, and in South Korea. On the other hand, conditions are getting progressively worse over 12 months, six months, and three months in France, Canada, Japan, China, and Turkey.

The improving group features the United States and some of its important trading partners, particularly Mexico, Taiwan, South Korea, and Brazil. Among those worsening sequentially, are France- even though the euro area itself, and Germany the largest economy in the euro area, are not sequentially deteriorating. Canada shows sequential deterioration despite being importantly and closely linked to the U.S. economy through trade even with the U.S. doing sequentially better. Japan trades a great deal with the United States, too, although its largest trading partner is China which is on this list as one of the deteriorating countries and China is having some significant issues. It’s no wonder that these are dragging Japan down. Turkey, of course, is not a surprise on this list because of its ongoing monetary difficulties and structurally high inflation rate.

The queue rankings for the current PMI values back to 2020 now show 7 of 18 countries with PMI standings higher than their medians for this period (That means standings above the 50% mark). Those with standings above the 50% mark include India, Russia, Indonesia, Brazil, Mexico, South Korea, and Malaysia. There are five countries with queue standings below their 25th percentile in the bottom quartile of their range. Those include Japan, China, the U.K., Canada, and France. In this comparison, the euro area barely escapes being categorized as it stands just above its bottom quartile with its 26.5 percentile standing. In contrast, U.S. standing is in its 40.8 percentile.
by:Robert Brusca
|in:Economy in Brief
Europe| Jan 31 2024
PPI Weakness Continues in EMU as Trends Become More Complex
Only 38% of the countries in the table show inflation accelerating in December. Inflation is much more broadly decelerating right now. In November, the accelerating/decelerating split was even.

Inflation has been moving lower, but its breadth across these 14 countries is above 50% showing more acceleration than deceleration, over three months and six months. The 3-month diffusion rate is 61.5%, the 6-month diffusion is a very high 92.3%. Still, year-on-yar inflation is decelerating on balance just about everywhere with a diffusion score of 7.7%. Inflation over 12 months accelerates compared to 12-months before that only in Luxembourg, hardly a regional bellwether.

Moreover, despite what the diffusion data tell us, over three months prices are falling by more where they are falling compared to the speed of increases where they are rising. The seven country-level prices that showed inflation increase over three months averaged gains of 5.9% compared to the seven categories with prices declining that show the average decline of 8.8%. The medians also show this with the median gain where there are price rises at 4.7% vs. the median decline of 5% where there are declines. These statistics juxtapose breadth vs. the intensity of a directional move.

Over six months not only is the tendency to accelerate broader (92% of respondents) but where prices are rising the average gain is 12.5% compared to an average decline of 9.3% where prices are falling. And when we shift to explore the median statistic where there are prices rising, the median price rise is 2.6% compared to the median drop being 2.1% where prices are dropping.

Year-on-year 13 of 14 PPI price indexes, are both decelerating compared to a year ago and falling compared to their year-on-year pace. So, inflation trends and tendencies are becoming more mixed, over shorter horizons. But in the aggregate, inflation rates are moving into a lower trajectory.
by:Robert Brusca
|in:Economy in Brief
Europe| Jan 30 2024
EMU Growth Continues to Slow; Reverses Q3 Drop
GDP in the European Monetary Union in 2023 Q4 rose by 0.1% based on its early release. This small gain reverses the direction of GDP that fell by 0.5% in the third quarter of 2023. It helps to establish a positive growth rate over the last four quarters at 0.1%, after the third quarter posted a year-over-year GDP growth rate of zero.

EMU avoids year-on-year GDP losses- The European Monetary Union has avoided year-over-year declines in GDP since the first quarter of 2021. This early report is based in part on released data for seven monetary union members plus estimates. The four largest EMU economies: Germany, France, Italy, and Spain, posted a GDP gain, in the fourth quarter of 0.1% when grouped together. This is below the 0.3% gain they logged in the third quarter. These four countries provided a year-over-year GDP gain of 0.5%, up from 0.3% in the third quarter but lower than the previous two quarters. Based on this early data the rest of the monetary union -apart from these four countries - saw fourth quarter GDP rise by 0.3%, a reversal of their third quarter decline of 2.5% and it compares to a 0.1% quarter-to-quarter decline in the second quarter of 2023. The rest of the monetary union group’s GDP declined by 0.9% in the fourth quarter year-over-year the same as its year-over-year drop in the third quarter. These early and preliminary data demonstrate that the Big-4 economies in the monetary union are carrying the weight of pushing growth forward.

Optimism for global growth? However, none of this comes close to the U.S. where fourth quarter growth annualized GDP was up 3.3% after posting 4.9% in the third quarter. The U.S. GDP logs in at a 3.1% growth rate over four-quarters in 2023-Q4, up from 2.9% over four-quarters that was registered in the third quarter of 2023. The performance of the U.S. economy provides some backing and reason for optimism for the global economy looking ahead.

Percentile standings reveal a lot of under-performance- Additionally, we can evaluate the year-over-year GDP performance of the countries in the table by comparing current year-over-year growth to growth rates in the past. On this basis, the U.S. clearly has the strongest relative growth rate with the 75-percentile standing for its 3.1% growth rate. Portugal has a standing in its 64th percentile, above its historic median for the period (medians occur at the 50-percentiel mark). And Portugal is the only European Monetary Union member in the table with a GDP growth rate above its median. For the monetary union, the 0.1% growth in the fourth quarter has a 19.6 percentile standing. Among reporting members, the strongest standing (apart from Portugal) is Belgium with a 43.5 percentile standing, Italy with a 40.2 percentile standing, and Spain at a 38-percentile standing. The lowest standing is from Ireland with a 5.4 percentile standing; Germany has a 20-percentile standing and the French standing rounds to its 23rd percentile.
by:Robert Brusca
|in:Economy in Brief
Ireland| Jan 29 2024
Irish Retail Sales Volumes Expand in December
Ireland's economy is not doing particularly well; however, the consumer portion seems to be holding up better than expected. Nominal retail sales (excluding auto sales) in December rose by 0.8% while real (ex-auto) retail sales rose by 0.3%. The inflation adjusted series rose by 1.9% over 12 months, fell at a 3.3% annual rate over six months and rose at an annualized rate by 5.1% over three months.

The nominal figures get the most notice, but of course, we are mostly concerned with sales in real terms.

In real terms, Irish sales (excluding motor vehicles) are up at a 3.9% pace in 2023-Q4 (in the just completed quarter for retail sales data). Food & beverage spending is up at a 3.7% pace. Clothing & textile spending is falling at a 5.5% annual rate. Total retail sales volumes are falling at a 0.8% annual rate in the fourth quarter.
by:Robert Brusca
|in:Economy in Brief
Germany| Jan 26 2024
GfK Projects Worsened Consumer Climate in Germany in February
Germany’s GfK survey for consumer climate fell sharply to -29.7 in February from -25.4 in January. This sharp deterioration reversed this two months of improvement in the index. This is the eighth sharpest month-to-month drop in the index headline and it is sharper than any drop experienced before May 2020. The GfK climate metric was last weaker in March 2023, nearly a year ago. Taking the current estimate, positioning it between its highest and lowest historic readings puts it at the 24.3 percentile mark, in the lower quartile of its historic high-low range. However, if we alternatively rank the observation in an ordered queue of data on the same timeline back to 2022, the February percentile standing drops to 3%. That tells us that the GfK index has been this weak or weaker only 3% of the time since 2002. The index is extremely weak, and it is dropping fast- a very bad combination.

German weakness amid global hope The graphic shows how the coming of COVID completely destroyed German confidence/climate that fell sharply and has been hovering around extremely weak readings ever since COVID occurred. And then, of course, in the wake up COVID, there was the Russian invasion of Ukraine. At the same time, the ECB has been relentlessly pursuing inflation which kicked up during this period. Among these three events, the German economy has simply been reeling. And German consumers are facing some of the worst conditions they've seen in the last two decades. Not surprisingly, Germany also faces political leadership questions. While some recent reports have showed that global conditions seem to be bottoming out and beginning to show some positive outlook, the GfK survey stands in marked contrast to this result.

Survey details – the news does not get better The details of the survey lagged by one month; they are for January 2024. German economic and income expectations fell sharply in January compared to December; economic expectations were last weaker in December 2022; income expectations were last weaker in March 2023. The propensity to buy also fell sharply in January, but it was last this weak only a couple of months ago in November 2023. The percentile account standings of these metrics show economic expectations in the lower 25.5 percentile of their ordered queue; for income expectations the standing is even weaker than that in the lower 7.2 percentile; the propensity to buy is the lower 22.1 percentile of its range. All of these are weak. And all of them have gotten significantly weaker in just the last month or two. In fact, the month-to-month drop in economic expectations has been worse only 21% of the time, and the monthly drop in income expectations has been worse only 4% of the time -Yikes!

Other Europe Confidence metrics for other-Europe are sampled from Italy, France, and the United Kingdom. The U.K. and France have readings that lag by a month behind the German reading while Italy’s reading lags by two months. The most recent observation for each one of these three countries shows an improvement compared to the month before. All three countries are on a multi-month improving trends for their confidence readings as well. None of them have confidence readings as deeply negative as Germany's. The U.K. confidence reading has a 34-percentile standing, the French reading has a 38-percentile standing, and Italy has a 74.7 percentile standing that is well above its median and seems to indicate a good deal of contentment.

GfK was worse than expected Germany’s GfK consumer climate index is a slice of unexpected bad news and at a time that other global metrics and other countries have been experiencing some improvement in their numbers and in their trends. For example, the S&P PMI indexes have showed some improvement and a bottoming out even though those indicators lag. There have been diminishing signs in the S&P survey of conditions of getting worse globally – some stability or even improvement seems in-train. The U.K., France, and Italy each show some improving trends in their confidence metrics. The United States not only did see its S&P PMI gauges improve, but the 2023-Q4 GDP report for the U.S. registered a very solid 3.3% growth after a strong third quarter, much better than private economists, or the Fed or even the administration, were looking for. At the same time, U.S. inflation data are amid an improving streak that left the core PCE deflator in the GDP report registering a 2% advance in terms of annualized quarter-to-quarter growth rates for both the third and fourth quarters. Year-over-year inflation on any measure is still well above the Fed’s and other central banks’ 2% target, but these recent releases for the U.S. are quite tantalizing and put the U.S. in a very different situation than any other country that has recently been reporting economic data.
by:Robert Brusca
|in:Economy in Brief
Belgium| Jan 25 2024
The Belgian National Bank Index Weakens
The Belgian National Bank index fell to -16.4 in January from -12.7 in December, snaking below its November 2023 level of -15.0. The index by itself is not particularly significant except it does track quite effectively both the German and the EU indexes issued by the European Commission. Since the Belgian index is released first, it's a harbinger of what we can expect from those other indexes and what's suggested here is that there will be further deterioration in January.

The total index The total industry Belgian index has a correlation of 0.85 with the EU index and of 0.78 with the German index. However, it's correlation based on month-to-month changes is even higher, at 0.92 with the EU changes and 0.85 with the German changes. These are all respectably high numbers and the correlations with the changes are quite high. The correlation on the changes corresponds with an R-squared with the EU of 0.86 and an R-squared with the German changes of 0.72.

Manufacturing in Belgium The Belgian manufacturing index slips to -22 in January from -17.8 December and is below its November value of -19.3. In January, the production trend turned more deeply negative, logging a reading of -19 compared to -7 in December and -5 in November. The domestic and foreign order trends also deteriorated in January compared to December; however, the foreign order trend in January is above its November level. Prices continue to show negative values and then in January the price trend declined by more after declining by less in December.

Other Belgian sectors Wholesaling and retailing strengthened in January compared to December, but metric is weaker than its November reading. Similarly, construction weakened relative to December but it's stronger than its November reading. Business services along with inventories are the only surveyed metrics that show positive readings. In January business services weakened compared to December, falling to +4.6 from +9.8; however, the January reading is still stronger than the November reading.

Trending changes Looking at changes in these metrics, only business services show positive changes over three months, six months, and 12 months. Prices and domestic order trends are the only metrics that show positive changes over three months and six months.

Rank standings The rank percentile standings reveal that weak readings abound in every one of the categories, showing percentile standings below their respective 50th percentiles everywhere. That means that all the readings are below their respective medians for this period. Data in the table are ranked across observations back to January 2010.

The distribution of weakness is concentrated in the areas of ‘very weak’ The only category close to its median for the period was inventories with the 49.2 percentile standing. After that, the next strongest standing is business services at a 38-percentile standing, followed by prices at a 25.8 percentile standing. The third highest standing in the table is at the border of its bottom quartile! After ‘prices’ all the categories are somewhere in their 15th percentile with all but one of the remaining categories below their respective 10th percentiles.

Weak with weak momentum These conditions show us a great deal of weakness in Belgium from an index that is highly correlated with German and EU indexes. The only momentum in this table comes from Belgian business services where there's a steady diet of positive changes underway. The changes that are underway for business services are tending to get larger/stronger over shorter periods, which is a good sign. However, manufacturing continues to show negative results and the current assessment for orders continues to show negative results.
by:Robert Brusca
|in:Economy in Brief