Introducing

Robert Brusca

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

Publications by Robert Brusca

United Kingdom| Nov 17 2023
UK Sales Values Increase as Volumes Implode
UK nominal sales and sale volume trends create completely different pictures of reality. But surveys join the volume data in seeing pronounced weakness and even the potential for a gathering storm.

Volume vs value assessments - UK sales values increased by 0.2% in October, but sales volumes fell at the same time; sales volumes have fallen for two-months in a row by -0.3% in October and by -1% in September. Nominal retail sales increased by 2.3% over 12-months and are expanding at a 2.4% annual rate over 3-months, giving the appearance of steady, if somewhat slow, expansion in sales. But retail sales volumes, adjusted for the effects of inflation, show declines of 2.7% over 12-months and a decline at a 3.2% annual rate over 6-months followed by a decline at a 4.1% annual rate over 3-months. Sales volumes are contracting, and the degree of contraction is growing over more recent periods.

Quarter-to-date - Similarly on the quarter-to-date, nominal retail sales show a 1% increase as sales volumes are contracting at a 5.2% annual rate.

Turn signals from autos? - Passenger car registrations have fallen for two months in a row, falling by 0.2% in October and by 1.4% in September. The progression of passenger sales registration shows a rise of 11% over 12-months, that accelerates to a very strong 36.7% annual rate over 6-months but then registrations weaken and fall at a 5.6% annual rate over 3-months. In the quarter-to-date passenger car registrations are falling at a 6.4% annual rate.

Survey results: the CBI UK surveys on retail sales provide some additional perspective on how sales are performing and how merchants tend to view sales trends. -The Confederation of British Industry (CBI) shows retail sales for the time of year falling to a -15 index reading from a + 14 in September. The progression of changes for sales shows a decline of 30 points over 12-months, a decline of 31 points over 6-months, and a decline of 9-points over 3-months. Retail sales for the ‘time of year’ declined by 8 points in October compared to their Q3 average; their October value has a 39.7 percentile standing in its historic queue of responses. On balance these are weak retail signals.
-The CBI assessment of the volume of orders judging from year-on-year growth rates, plunges to a minus 18 response from plus 18 in September. However, the progression of changes shows this order metric lower by 36 points over 12-months and lower by 38 points over 6-months then higher by 2-points over three months.

Consumer Confidence - Consumer confidence (also plotted on the chart above) drops to -9 in October from +4 in September. Consumer confidence has been flat, over 3-months and 6-months but is up by 17 points over 12-months. Still, confidence is lower by 4.7 points in October compared to the Q3 average. And its queue standing is in the 15th percentile of its historic queue of results, quite weak.

Conclusion: Weak! Weak is the bottom line on UK retail sales in October. The nominal signals are copacetic but misleading. Passenger car registrations have a high queue standing in their 81st percentile but show some near-term weakening. Food and beverage spending is holding to high ground as well. But overall nominal sales, and total sales volumes, the CBI metrics, as well as consumer confidence, all score extremely weak readings. Fortunately, inflation in the UK is turning lower - still excessive - but moving in the 'right' direction. Still, there will be no 'relief' from monetary policy anytime soon and, in the meantime, retailing is weakening.
by:Robert Brusca
|in:Economy in Brief
Japan| Nov 16 2023
Japan’s Deficit Reduction Trend Grinds to a Halt Nominal and Real Signals Are at an Alarming Divergence
The year-on-year trends show that Japan’s nominal imports have weakened significantly since late 2022. Exports have slowed as well, but the import weakness has been more dramatic and has transited to a lasting series of negative year-on-year growth rates. Over the past several months imports have been weakening, shrinking, while exports are growing slowly and the deficit on+ the trade account for goods remains unchanged. Even with reasonably severe import weakens Japan is not making progress in reducing its trade deficit situation.

Inside the one-year mark looking at nominal export and import growth over six months and three-months we find both exports and imports are gathering pace but, of course, exports are growing faster than imports. Export growth ramps up from 1.5% over 12-months to a 6-month pace of 13.2% and a 3-month annualized pace of 17.4%. Imports that contract by 15.4% year-on-year also recover to a flat performance over 6-months and grow at a 10.8% annual rate over 3-months.

The yen has weakened over the last 12-months falling by 1.7% Vs the dollar over 12-months and concentrating its decline into the recent 6-months and 3-months when the annual rate of yen decline Vs the greenback is 26% or so. The broad, real effective yen index has also fallen by 2.5% over 12-months and at a faster 12% to 13% annual rate over 3-months and 6-months.

Real vs nominal trade data and trends And, as is often the case, the nominal and the real data tell very different stories of what is going on here. Export prices rise by 2.4% over 12-months in Japan while import prices drop by 11.6%. Then both export and import prices rising strongly over 6-months and 3-months with import prices rising at a 35.4% annual rate over 3-months and export prices up at a 23% annual rate over 3-months.

As a result of the divergences in export and import prices, the trends that impact real export and import flows cause the real and nominal flows to look quite different. Real exports and real imports both fall over 12-months with real exports falling by 0.9% and import volumes falling by 4.3%. The import declines step up to show drops at a 10.8% annual rate over 6-months and at 18.1% over 3-months. Export volumes also weakened progressively, but more mildly, falling at a 2.6% annual rate over 6-months and at a 4.7% annual rate over 3-months. Given the weakness in the real flows, the weakness in the yen over this period makes perfect sense to try to ameliorate these trends.

Of course, one difference between what the nominal and real data show involves the somewhat trivial differences over 12-months where nominal data show weak export growth and more severe import weakness. But then, both flows gain pace over shorter horizons. That’s where real differences emerge. The real flows show declines in both export and import volumes over 12-months and less draconian import weakness, with export volumes weakening mildly but progressively and import volume weakness increasing sharply over 6-months and 3-months. The implications for policy are quite different. Japan is looking like it is further weakening based on what import volumes tell us about domestic demand conditions in Japan. Japan’s economic conditions bear close watching if the real trade data are reliable barometers.
by:Robert Brusca
|in:Economy in Brief
Europe| Nov 15 2023
EMU IP Dives in September - Broad-based Weakness
Euro-Area IP is falling in September. The declines are broad across industry groups and across EMU member countries. Industrial output has been volatile among the four largest economies in EMU as well. Despite the clear broad weakness in industrial production the sequential growth rates are not progressively deteriorating. Growth for headline production as well As for manufacturing show contractions over 12-months, over six-months, and over 3-months and the contractions over 3-months are greater than they are over 12-months. But there's a slight revival with less weakness over 6-months compared to 12-months preventing a clear path to deterioration from emerging.

Manufacturing sectors - Looking at sectors in manufacturing consumer durables output fell 8% over 12-months, at 15% annual rate over 6-months and fell at a 10% annual rate over 3-months. Consumer nondurables contracted by 6.8% at an annual rate over 12-months at 10% pace over 6-months and at a 3.5% annual rate over 3-months. Intermediate goods output shows lessening deterioration, as a 4.7% decline over 12-months is reduced to 3.4% over 6-months and is educed to a -2% pace over 3-months. Capital goods output falls by 7.6% over 12-months rises at a strong 23% annual rate over 6-months then plunges at a 9.8% annual rate over 3-months. These are complex patterns. Only capital goods mount any increase in output over any of the horizons, then that rise is reversed. However, there's no persistent deceleration, just scattered ongoing declines that seem to change pace randomly. The chart that plots only year-over-year trends paints a darker picture.

Quarter-to-date - Quarter to date statistics show headline production excluding construction falling 6.5% at an annual rate in the third quarter, manufacturing output falls at an 11.1% annual rate, drop is led by a decline of 11.9% in durable goods output an 8.8% drop in consumer nondurable goods production, with the immediate goods output falling at a 2.6% annual rate and capital goods output declining at a 3.5% annual rate.

Output by sector - All the output comparisons by sector show mixed results when we compare the current level of activity to that prevailing in January 2020 before COVID struck. Consumer nondurables output is stronger, capital goods output is stronger, but consumer durables output is weaker, and intermediate goods output is weaker. If we rank the sectors by their growth rates back to 2006 current performance is weak for all the sectors total and industrial production growth has an 8.3% ranking, manufacturing output growth has an 8.8% ranking, consumer durables growth has an 8.8% ranking, consumer nondurables have a 1% ranking and intermediate goods have a 16.6% ranking; capital goods growth has a 10.2-percentile ranking. The growth performance for this past year is quite weak compared with historic norms and you can see what those growth rates are on the table and see by judging the progressive pace of growth conditions haven't improved very much over 6-months or over 3-months.

The output statistics for countries is similarly weak the reporting remove member countries showing output declining in September except Italy that manages a 0.1% increase in Malta a tiny economy that manages a 1% gain. In August six countries logged output gains month to month well in July output gained in most countries with only six of thirteen showing output declines.

Industrial growth across countries - Sequential growth rates show that weakness has been pervasive. Over 3-months for example only three countries in the monetary union show industrial output increases, over 6-months only two had increases and over 12-months only two show increases. These metrics reveal the broad nature of weakness in the industrial sector within EMU. Similarly with the third quarter data complete there are only two countries with quarter to date increases in output those are Finland with a 5% increase and Malta with a 4.8% increase.

Growth rankings - The rankings for the growth performance of countries over the past year compared with their historic standards show every country below its median result except for tiny Malta that has a standing of 51.2%, just a nudge ahead of its historic median that occurs at a ranking of 50%. Greece, another small economy, manages a ranking of its growth rate that is up 2.1% to a 70.7 percentile standing well above its median. In part, that also underscores how little output increased in Greece that a 2% growth rate could have a 70-percentile standing. Ireland is having its worst performance of the entire period, its a year in which output has fallen by 27%. The median percentile ranking among monetary union members is a ranking of 16.1% the average ranking is a ranking at 22.1% both of these show extreme weakness across the Euro Area in the industrial sector.

There is little in the way of good news in this industrial production report for September. The headline weakness is clear and the weakness spreads across countries and there's little in the report that suggests that this period of weakness is letting up in any way. However, we're at a time where there has been some growing optimism about the US economy gaining its footing and show some inflation progress that an increasing number of market participants are evaluating as evidence that the Fed is done raising interest rates. If that's true, given the size and the importance of the US economy, there could be better news for Europe ahead.
by:Robert Brusca
|in:Economy in Brief
Europe| Nov 14 2023
Zew Metrics are Mixed in November
Zew metrics showed a weaker economic situation in the Euro-Area this month while Germany strengthened and the US weakened, a mixed picture across these regions. Economic expectations show a stronger Germany and a weaker US performance expected.

Inflation expectations showed stronger inflation expected in Germany and the Euro-Area. Weaker inflation is expected in the US. Short term rate expectations were weaker in the Euro-Area and weaker in the US as inflation has been coming in and showing signs of behaving. Long term rate expectations fell in both Germany and in the US. Stock expectations month-to-month improved in the Euro-Area in Germany and in the US.

Economic conditions continue to show rankings well below the 50% mark for the economic situation for Germany for the Euro-Area and for the US. Economic expectations are also well below the 50% level which would mark a neutral reading. Inflation expectations, however, are uniformly low as investors expect inflation to decline from its high level and so the expectations metrics have extremely low percentile standings. Short-term rate expectations are also low because investors basically assume that central banks have pretty much got interest rates where they want them and they look for any further rate changes to be more or less window dressing. This explains why long-term interest rates have exceedingly low percentile standings. Long rate expectations for Germany are at 4.4%, in the US they are at 0.3%. There are few expectations that rates are going rise at this point. And with that expectations have shifted to the stock market where the expectations are closer to or above the 50% mark and investors are beginning to think equities again for better or for worse. Things change...
by:Robert Brusca
|in:Economy in Brief
Italy| Nov 10 2023
Italian IP Nudges Higher But Remains in a Downtrend
Italian industrial production for manufacturing rose 0.1% in September after gaining 0.3% in August. These increases came after a 1.2% drop in July and they're still part of a sequence of continuously declining industrial production calculations over the past 12 months for Italy.

Italian manufacturing production fell by 2.2% over 12 months; the pace of reduction has eased slightly to -1.5% over 6 months then it steps up to a decline at a 3.4% annual rate over 3 months. We see industrial production declining on all three timelines. The 3-month deterioration is at a faster rate than at 12-months, but over 6 months, there's an interruption in that deteriorating trend that makes the overall trend ambiguous.

Consumer goods- Consumer goods production fell by 2.2% in September after rising 1.3% in August and falling 1.6% in July. The annual rate decline in consumer goods output is 6.8% over 12 months; that's reduced to a 4.7% declining pace over 6 months but then blows out to a decline of 9.5% at an annual rate over 3 months. This pattern echoes the overall pattern from manufacturing output on the same timeline.

Capital goods- Capital goods output rose by 1.5% in September after output declined in August and July. Capital goods output shows a clear decelerating sequential trend, however. After rising 2.6% over 12 months, it reduces that to a 1.2% pace of increase over 6 months and then output declines at a 2% annual rate over three months.

Intermediate goods- Intermediate goods output rises by 0.8% in September after falling 0.7% in August and falling 0.4% in July. Intermediate goods are the only category that shows that declines in output are occurring at a diminishing pace as output falls 2.8% over 12 months; that's reduced to a -1.4% rate over 6 months and reduced slightly further to a -1.2% annual rate over three months.

Overall manufacturing goods production clearly is declining although the sequential patterns are not firmly established.

Transportation- Trends for transportation equipment show deterioration although there's a strong gain of 6.1% in September compared to August. Output rises at an 11.7% annual rate over 12 months, and at a 5.9% annual rate over 6 months, but then falls sharply at an 8.6% annual rate over 3 months.

Industrial measures Various industrial measures are presented at the bottom of the table including the EU industrial confidence measure, the Istat current orders and Istat outlook for production. In the most recent 3 months, there are nine of these observations and of these nine observations only one is positive and another is zero; the rest are negative, showing widespread weakness across these industrial metrics.

The industrial metrics show persistent negative readings over 3 months, 6 months, and 12 months. But that generally is not a pattern of worsening deterioration. The industrial confidence measure and the Istat current orders measures both show readings that are less weak over 3 months than over 12 months although the Istat outlook for production metric is weaker over 3 months and over 12 months.

Rankings Turning to the final column of the table, the rank standings show all these metrics are below their historic medians (that means below a ranking of 50%) except for capital goods output. Manufacturing industrial production has a 28-percentile standing, consumer goods output has an extremely weak 6-percentile standing, intermediate goods have a 31.6 percentile standing, while capital goods have a 60.7 percentile standing, above its historic median. For transportation output, there's also a reading that's above its 50-percentile at 69.5. However, the industrial measures at the bottom of the table have very weak standings for the most part with the EU industrial confidence measure having a standing just under its 20-percentile. The Istat outlook for production reading is at its 14.1 percentile and the Istat current orders reading is at its 37.3 percentile.
by:Robert Brusca
|in:Economy in Brief
Japan| Nov 09 2023
Japan’s Economy Watchers Survey Weakens
Japan’s economy watchers survey has declined broadly in recent months, but recent weakness may overstate the degree of weakening present in the economy at this time.

Japan’s economy watchers current reading, a diffusion index of assessments, dropped in October to 49.5, down from 49.9 in September and from 53.6 in August. The future index also slipped to 48.4 from 49.5 in September and 51.4 in August. Both the current and the future indexes are slipping, although the current index still has a queue standing in its 67th percentile, barely on the top one-third of values it has experienced since 2002. The future index has a queue standing at its 49th percentile which places it just below its historic median; queue standing statistics put the median at a standing value of 50%.

The weakness in the indexes recently is quite striking with diffusion data shown at the bottom of the table. The monthly diffusion data calculate the proportion of indexes that are improved month-to-month. Diffusion values for October, September and for August all are at or below their 30th percentile indicating that even in the best month no current or future responses improved for more than 30% of the observations. This tells us that the deterioration is broad based over the last three months.

The sequential calculations in this table look at point-to-point changes as well. Since these are diffusion data, there's no sense in trying to annualize these data; these are just point-to-point changes and diffusion data. For the current observations, we have a decline of -4.9 points over 3 months, -5.1 points over 6 months and -1.3 points over 12 months. The slippage over 12-months is relatively small; the slippage over 6 months is substantial and because there's a 4.9-point decline over 3 months we can see that most of that slippage has occurred in the last 3 months.

The future index shows a decline of -5.7 points over 3 months, a decline of -7.3 points over 6 months and an increase of +1.3 points over 12 months. Expectations were slightly better over 12 months than they were a year ago. And once again the bulk of the slippage in this index has occurred over 3 months where 5.7 diffusion points are lost with only 1.6 diffusion points lost over the previous three months (to total -7.3 over six months).
by:Robert Brusca
|in:Economy in Brief
Germany| Nov 08 2023
German Inflation Is Heading Lower Rapidly; But for How Long? How Low Will It Go?
Inflation in Germany fell by 0.2% in October on the HICP measure; the core rose by 0.2%. The German domestic measure inflation was zero while the domestic CPI excluding energy rose by 0.1%. On all these metrics inflation performed quite admirably in the October report.

Not only was the October report good, but in terms of the HICP measure September was excellent as well. In September the HICP had been zero, but the core fell by 0.2%. On the German domestic measure, the CPI was up by 0.3% in September while the CPI excluding energy was up by 0.2%. September numbers for the domestic measure were not as stellar; they were mixed with the 0.3% headline gain being too strong (3.7% annualized).

Germany’s HICP- Okay, the sequential inflation numbers are behaving- trending. The HICP headline rises by 3% over 12 months, at a 2.4% annual rate over 6 months, and it decelerates to a 1.3% annual rate over 3 months. The core rate on the HICP measure is up 4.9% over 12 months. It settles down to a 3.2% annual rate over 6 months and clocks in at 1.6% at an annual rate over 3 months. That is good progression and once again it brings the 3-month inflation rate down to within the target that the European Central Bank seeks for the euro area as a whole.

The German domestic gauge- The inflation rate for Germany's domestic measure does not perform quite as well. The inflation rate is at 3.7% over 12 months, that decelerates to a 2.4% pace over 6 months then picks up to a 3.1% annual rate over 3 months. It refuses to dip down inside of the ECB's preferred target band. The German domestic measure for ex-energy inflation rises at a 4.5% annual rate over 12 months, cruises at a 2.7% annual rate over 6 months and then picks up to a 2.8% annual rate over 3 months, once again refusing to fall into the prescribed target range of the European Central Bank.

Diffusion- Diffusion calculations are executed on detailed domestic data. They show some progress but not the same excellence as the HICP. The HICP is a measure crafted to fit across all EMU members and since members could not agree on how to treat housing costs, they are absent from the HICP. Diffusion values over 50% indicate prices increasing period-to-period faster more than slower while under 50% prices are slowing more than accelerating.

Diffusion results- Diffusion in the domestic measure shows a reading of 63.6% comparing 12-month price increase to those of one year ago across all major commodity groups. The diffusion measure falls to 27.3% when applied across groups to 6-month price changes annualized against 12-month changes. However, over 3 months the diffusion metric rises to 45.5% comparing the 3-month trend to the 6-month trend across categories- close to the neutral 50% mark. These diffusion data are poor for the 12-month gauge, excellent over 6 months, but then giving a constructive, but weak signal over 3 months.
by:Robert Brusca
|in:Economy in Brief
Germany| Nov 07 2023
German IP Sector Trends All Decay
German capital goods trends continue to turn lower in September as industrial production declines; the losing streak for monthly German industrial production now stretches to four months in a row as output falls at a 7.6% annual rate over 3 months faster than its 6.2% annual rate drop over 6 months which is faster than its 3.9% drop over 12 months.

Broad weakness in output across sectors- The weakness in output at the headline level is echoed by two of the three component sectors and barely violated by one of them. Consumer goods output falls at a 9.6% annual rate over 12 months, falls at a 12.3% pace over 6 months and falls at an extremely weak 23.6% annual rate over 3 months. Capital goods output that manages an increase of 1.2% over 12 months falls at a 3.1% annual over 6 months and then falls at a stepped up 4.1% annual rate over 3 months. Intermediate goods output falls at a 6.1% annual rate over 12 months and falls at nearly the same pace (slightly less, at a 5.7% rate decline) over 6 months but then accelerates to an 8.5% annual rate decline over 3 months. Despite the slight 6-month prevarication, in the trend for intermediate goods deceleration, the signals from industrial output across sectors give a very clear sign of deepening weakness in German manufacturing.

Construction- Construction output goes its own way a bit more, rising by 2.1% in September, falling in August and rising in July. Construction shows no clear trend in output, but output does rise over 12 months and over 3 months.

Mainline reports are weak- The mainline reports of manufacturing output, real-orders, and real-sales, show deterioration and all but real orders are consistent with the notion of secular deterioration at an accelerating pace.

Other indicators’ surveys Surveys show mixed results for changes in values between September and August. However, all surveys show deterioration from 12-months to 6-months and from six months to 3-months based on average data. All surveys are deteriorating on a quarter-to-date basis (that’s with Q3 data now complete).

Selected other Europe The four countries for other Europe that represent early reporters of industrial output show declines across the board in September. All show IP declines over three months as well; only Portugal shows less weakness over 3 months than over 6 months. All also show declines in IP over 12 months. The pace of the year-on-year declines is replicated or worsened over 6 months except in France.

WEAKNESS! What emerges from these considerations is a clear picture of deterioration and generally of worsening growth according to IP and indicators for Germany. Industrial output trends for Portugal, Spain. France, and Norway follow suit. It’s a grim picture for manufacturing in September in Europe.
by:Robert Brusca
|in:Economy in Brief
Germany| Nov 06 2023
Unexpected Rise in German Orders Leaves Order Profile Still Weak
German real orders unexpectedly rose in September; however, it's not the surprise that it may seem on the surface. They gain in order was only 0.2% following a 1.9% rise in August; while a gain of 0.2% after a gain of 1.9% might seem significant, those two months followed a decline of 11.4% in July. Because of that, the profile of German orders continues to be negative, with real orders falling 4% over 12 months, accelerating to rise at a 7.1% pace over 6 months, then diving to drop at a 33% annual rate over 3 months.

Foreign real orders rose by a strong 4.2% in September after a 1.6% gain in August. Those two brisk increases follow on the heels of a much more substantial 12.7% decline in orders in July. Foreign orders rose by 0.8% over 12 months, rose at a 19.9% annual rate over 6 months, then fell at a 27.3% annual rate over 3 months. And 12-months ago year-on-year real foreign orders were falling 13.8%. The table (below) depicts an isolated island of revival in foreign orders over the last 12 months and 6 months that previously had shown order declines and is doing so again over three months. The foreign sector hardly looks like a back-bone of growth to support the German economy through the export sector.

German domestic orders fared much worse, falling by 5.9% in September, rising by 2.3% in August, and falling by 9.2% in July.

Sequential orders fell by 11% over 12 months, fell at a similar 10% annual rate over six months and fell at a 41.4% annual rate over 3 months.

None of these categories make orders look anything like ‘firm’ or ‘solid,’ let alone ‘strong.’ But the domestic situation is clearly the worst.

Sales trends- abysmal Real sales trends across sectors show declines in all categories in September. All categories show declines over 3 months as well. Over 6 months, only capital goods showed a rise with the other metrics for real sales falling. Over 12 months, again, all categories showed declines except for capital goods sales. Real manufacturing sales declined by 2.5% over 12 months. That improved technically to a 2.4% annual rate drop over 6 months, then, over 3 months sales plunged at an 11.3% annual rate.

QTD trends Quarter-to-date (QTD) trends show orders falling overall as well as for foreign and domestic orders – led by extreme domestic weakness. Real sales by sector register declines in all categories as well, led by weakness in consumer durables.

European conditions Industrial confidence, according to the EU Commission measures, shows net negative readings in September for Germany, France, Italy, and Spain. Month-to-month conditions improved in Germany and France but deteriorated in Italy and Spain. Over 3 months, however, all four countries show conditions weakening; conditions also weaken over 6 months compared to 12 months. In the quarter, all four countries have EU Commission readings that are below historic median in each of these countries.
by:Robert Brusca
|in:Economy in Brief
Europe| Nov 03 2023
EMU Unemployment Ticks Higher in September
In September, the unemployment rate rose in the European Monetary Union to 6.5% from 6.4% in October. The rate had been chopping around between 6.5% and 6.4% over the last four months. There's nothing decisive about this rate increase except that the rate has stopped moving lower. The unemployment rate has gone from its trend of persistent declining to a period of waffling and failing to be able to make a new low. This begins to look more like the end of a run for the declines in the unemployment rate and the European monetary system. And given how far the decline has come, it's not surprising.

Some members still experience falling rates of unemployment- In September the unemployment rate fell in only one monetary union member in the table, and that is Greece where the unemployment rate fell quite significantly from 10.6% in August to 10% in September. Greece has the second highest unemployment rate in the table exceeded only by Spain at 12% in September. Greece is the only country in the table with the unemployment rate falling for three months in a row. Greece is also the country that is making the most progress overall in reducing its unemployment rate that is lower by 2.1 percentage points over 12 months. Among the twelve countries in the table, only five have net-lower unemployment rates over 12 months. That pack is led by Greece, followed by a 0.9 percentage point decline in Spain, a 0.6 percentage point decline in Italy, a 0.2 percentage point decline in Ireland, and a 0.1 percentage point decline in Germany.

Broadly low rates across the monetary union- The lowest unemployment rate in the monetary union among countries in the table is Germany at 3%. However, the lowest ranking unemployment rate in the table belongs to Ireland where its 4.2% unemployment rate sits in the lower 5.5 percentile of its historic queue of unemployment rates. That compares to a 6.7% standing for the nominally lower German rate. It points out that the relativity in these unemployment rates differs across countries and helps to explain why for the monetary union the overall EMU rate standing is at 2.1 percentage points, a lower standing than any country in the table. It's because the coincidence of low unemployment rates across all these countries is very unusual and has contributed to an unusual and extremely low unemployment rate for the monetary union itself.

Declining unemployment rates are becoming scarce- However, declines in unemployment are becoming rarer over three months; only two countries have unemployment rates lower over three months; they are Ireland and Greece. Over six months, four countries have lower unemployment rates: Portugal, Greece, Spain, and Italy. Over 12 months, unemployment rates fell in five countries and rose in seven countries.

Below-median unemployment rates are a common feature- Still, unemployment rates across the monetary union are low; they're below the medians for all countries except two. Only Luxembourg and Austria among country members in the table log employment rates above their 50-percentile mark which means they're above their historic medians for this period.
by:Robert Brusca
|in:Economy in Brief
Switzerland| Nov 02 2023
Swiss Inflation Remains Contained
Inflation in Switzerland continued post solid low inflation numbers as the headline rose 0.1% in the HICP measure for the third month in a row. The Swiss CPI measure rose by 0.1% in October, the same as in September and compared with a 0.2% increase in August. Switzerland’s core measure rose 0.2% in October after being flat in both September and August.

Switzerland continues to have outstanding inflation performance and continues to consistently outperform Germany as well as the European Monetary Union in this regard.

Sequential inflation rates measured on the HICP scale show 2% inflation over 12 months, decelerating to a 1.7% pace over six months and decelerating to a 1.1% annual rate over three months. The Swiss CPI is up by 1.7% over 12 months and at a 0.9% pace over six months; it accelerates to a 1.5% annual rate over three months. The Swiss core rate is up by 1.5% over 12 months, and at a 0.5% annual rate over both six months and three months.

These numbers are the envy of all other central banks during this period. Globally, inflation has flared, and central bankers have overshot their targets consistently. Switzerland has been able to contain inflation better than in other central banks.

Looking at the inflation rate annualized since January 2020, before COVID struck, the Swiss HICP measure is up at a 1.8% annual rate; the domestic measures is up at a 1.8% annual rate as well; the Swiss core rate is up at a 1.2% annual rate. Excluding Swiss administered prices, inflation is up at a 1.7% annual rate over the same span.

Inflation detail for October shows some acceleration for inflation month-to-month. The core rate is up to 0.2% compared to a 0 percent change in September. Excluding administered prices, inflation rose by 0.3% in October compared with a 0.1% decline in September. Food & beverage prices rose 0.4% in October compared to -0.2% in September; health costs were flat in October after falling by 0.1% in September; recreation & culture events saw prices rise by 0.3% in October after falling by 0.1% in September. The catch-all ‘other goods and services’ saw prices rise by 0.2% in October after being flat in September. None of these changes is particularly concerning in the monthly report.

Over three months, the Swiss HICP measure decelerates, the Swiss core measure is unchanged, compared to its six-month pace and the Swiss domestic headline measure accelerates to 1.5% after a 0.9% rise over six months. Categories showing prices accelerate over three months compared to six months across the board. Accelerating most sharply over three months are clothing & footwear prices that rose at a 35.1% annual rate, but the series is not seasonally adjusted. There is acceleration posted in transportation as well as in health and recreation categories; however, among these three categories two of those three log price declines on the month. Yet all three categories show price acceleration because prices declined substantially over six months! Education costs accelerated and they're also not seasonally adjusted, but they rise from a 1.8% pace over 12 months to a 3.6% pace over six months to an annual rate of 7.3% over three months. That progression is suggestive of true underlying price pressures. The other goods & services category shows consistent pressure but just by a tick period-to-period.

The Swiss unemployment rate remains low at 2.1% in September, the same as August six-months ago. The rate had been as low as 1.9%; a year ago it was at 2.1% and two years ago it was at 2.9%. Since COVID struck in January 2020, the unemployment rate is lower by 1.4 percentage points. The Swiss economy is performing very well on the inflation front. But in real terms, the economy is beginning to experience some slowing even though it is not reflected in the rate of unemployment yet.
by:Robert Brusca
|in:Economy in Brief
Global| Nov 01 2023
Global Manufacturing PMIs Remain Weak and Basically Trendless
The Standard and Poor’s measures for manufacturing unemployment globally show somewhat mixed results tilted to weakness I went in October as 7 of 18 improved month-to-month while 11 of 18 worsened. The median observation for October fell by 0.6 diffusion points to 48.7, a value that indicates manufacturing contraction overall among this broad sample of reporting units.

Sequential trends Sequential trends show 8 of 18 reporters with improved manufacturing PMIs comparing average levels over three months to six months ago. Comparing average levels of six months to 12 months ago, ten of them are improved out of 18. The six-month mark shows that there has been a broad improvement compared to 12 months ago; however, over 12 months compared to the period of 12 months earlier, there is broad weakening; only five reporters show stronger values over 12 months than over 12 months ago.

Rankings Ranking data that assess the current October levels of the PMI among all data since January 2019 show that the average standing among that queue of values for these reporters is at the 26th percentile; that’s right at the bottom 25% of all observations for the period. This marks the current manufacturing set of estimates as quite weak. Mexico and Russia show percentile standings around the top ten percentile of data over this period. Only 4 reporting units show PMI values that are above their medians which means above the ranking of 50%; one country, South Korea, is right at its 50% mark. The two countries that are above their medians are above them moderately: India with the 59.6 percentile standing and Indonesia with a 57.7 percentile standing.

Compare to pre-Covid Compared to data back to January 2020, only four reporters show stronger values for manufacturing PMIs: Russia (if you believe it), Mexico, Indonesia, and India. South Korea sits at the same mark it had in January 2020.

On balance… On balance, manufacturing remains quite weak globally with little sense of momentum. The median for the PMI values from 12-months to 6-months to 3-months has crept higher but very little, moving from 48.5 to 48.6 to 49.1. These metrics compare to an October stand-alone median reading at its 48.7 percentile – weaker again.
by:Robert Brusca
|in:Economy in Brief