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| Sep 04 2025
Monetary Union Retail Sales Ease as Vehicle Sales Pop
Retail sales volume in the euro area fell by 0.5% in July after rising by 0.6% in June. The three-month percent change is -0.8% at an annual rate; over six months real retail sales volumes are rising at a 1.6% annual rate and over 12 months they're rising at a 2.2% annual rate. The slowdown in retail sales volume growth has been steady from 12-months to 6-months to 3-months.

For motor vehicle registrations, the patterns are much choppier with an 11.5% increase in registrations in the EU in July after a drop of 4.6% in June, and a larger drop in May. Over 3 months monetary union motor vehicle registrations are falling at a 3.4% annual rate, after rising at an 8.7% annual rate over 6 months; over 12 months that gain is cut to a 5.9% annual rate. There's no clear trend here for motor vehicle registrations, except to note that over 3 months conditions are much weaker and that is mostly driven by June and May because July was quite strong. In the big picture, vehicle sales have been flat and moving sideways for quite some time in the monetary union- since COVID registrations are lower on balance by 10.5% even with the spike in sales in July.

Individual countries show quite different results. Germany is showing persistent deceleration in retail sales volume growth from 12-months to 6-months to 3-months, culminating in negative numbers for growth over 3 months and 6 months. For Denmark, a country that's not part of the single currency union, there's a hint of a slowdown with growth rates of 3.4% over 12 months and 3.6% over 6 months to give way to a 1.2% rate of increase annualized over 3 months. Both Sweden and Norway show real retail sales volumes in a slippage mode as growth rates ease over 6 months compared to 12 months and then ease again over 3 months compared to 6 months. For Sweden, the 3-month growth rate is a negative result at -5.7% at an annual rate.

In the quarter to date - and this is an early calculation since it's July - the monetary union is starting off with a negative growth rate of -1.2% at an annual rate for total retail sales volumes; this is affected strongly by a -6.5% annual rate reported by Germany, the largest economy and the euro area. There are positive growth rates on a quarter-to-date basis for the rest of the reporters in the table. The Netherlands logs a 21.9% annual rate increase; that strength has at least as much to do with the weak second quarter base as with surging sales in July.

Checking on the performance of sales back to January 2020 when COVID first appeared, total sales volume in the euro area are up 5.1% over that five-year span. Sweden logs no increase, Germany logs an increase of 2.1%, Norway logs an increase of 4.6%, with Denmark up by 4%. The strongest increases on this broad basis come from Spain with an 8.1% increase and the Netherlands with a 7.2% overall increase. Even so, for a five-year period, none of these growth rates are impressive. Clearly the European Monetary Union has been in a dead spot having a difficult time recovering from COVID, dealing with the war, and all of its displacement involving Russia and Ukraine, as well as the aftermath of the inflation from COVID, and what has been an ongoing restrictive monetary policy from the European Central Bank.
by:Robert Brusca
|in:Economy in Brief
Global| Sep 03 2025
S&P Composite PMIs Improve in August
The S&P composite PMIs in August have advanced broadly with only four of 25 reporters showing weaker conditions in August compared to July. In July 13 of these same reporters showed worsening conditions and in June 12 reporters showed worsening conditions. August is a marked turnaround for this survey. One caveat is that the U.S .data in this report continued to use the preliminary services estimate because the final U.S. estimate is not yet available.

Over three months compared to six months, 9 of 25 reporters show worsening conditions. Over six months compared to 12 months, 12 of 25 reporters showed worsening conditions. Over 12 months compared to a year ago, 15 reporters out of 25 showed worsening conditions. There has been a progression in terms of the breadth for reporting countries that are showing improvement in addition the overall average. It has improved slightly from 51.7 over 6 and 12 months to 51.9 over 3 months. The medians have improved from 51.1 over 12 months to 51.5 over 6 months to 51.6 over 3 months, a slightly clearer progression toward better results. Still, both of them are on fairly thin margins of improvement. However, June to August the averages and medians show a little bit more movement and a little more progression to better readings.

The statistic that is perhaps most encouraging is the one about the percentage of reporters that are weaker in August; only 16 were weaker compared to July; in July 52% were weaker compared to June, but in June 48% were weaker compared to May. Looking at the broader progressive period, 39.1% are weaker over 3 months, 52.2% are weaker over 6 months compared to 39.1% weaker over 12 months. The proportion of reporters weakening over these horizons is moderate on the order of 40% to 50%- tending to readings below 50%.

The queue percentile standings show only 8 reporters out of 25 have standings below their median since January 2021.

The chart on top depicts separately the services business activity index for the euro area versus the euro area manufacturing PMI. While the services readings have been relatively stable - perhaps trending slightly to weakness from earlier in the year - manufacturing PMIs have been improving consistently and strongly. At first it was thought that this was manufacturing activity that was ramping up to try to create output to export before U.S. tariffs went into effect, but since the tariff deadline has come and gone, manufacturing has continued to stay strong and to further strengthen. This is an unexpected and impressive trend.
by:Robert Brusca
|in:Economy in Brief
Global| Sep 02 2025
Inflation in Europe Shows Mild Pressure
Inflation in August was well behaved; the headline series with the monetary union posted a gain of 0.2% after 0.3% gains in each of the previous months. Still those increases mean that the three-month inflation rate is at 3% compared to 2.1% over 12 months. Stop headline inflation has grown moderately hot in the monetary union.

Across countries the largest EMU members has so well-behaved inflation in August, with Germany up 0.2%, France up 0.1%, and Italy and Spain both unchanged. However, inflation in the previous two months was a bit stronger leaving three-month inflation rates for France, Italy, and Spain over 2%. Over six months only Italy is over 2% and that's barely, and over 12 months only Spain is substantially above the 2% mark.

Core inflation in the monetary union is where the elusiveness and stubbornness is for the three large economies that report core inflation. Germany actually reports ex-energy inflation. Italy and Spain report core inflation. They're all showing increases of 0.3 and 0.2 over the last two months. Over three months German ex-energy inflation is running at a 2.4% annual rate with Italy's core at 2.7% and Spain's core at 3.8%. Over 12 months German ex-energy inflation is up at a 2.6% annual rate, compared to a 2.4% annual rate for Spain’s core and Italy’s core that that is nearly on the money at a 2.1% annual rate.

The 12-monht inflation rate is marginally worse for headline and core rates across this group of countries in August compared to July. For the EMU, the headline is the same at 2.1%. Even though shorter measures show some pressure building, 12-month inflation is marginally lower in August 2025 than in August 2024 for headline and core measures in the large countries.

However, there has been no sense of controlled inflation recently as all averages are clearly excessive with the average five-year reading at a low of 3% for core inflation in Italy to a five-year average high of 4.5% in Germany. This legacy for inflation is still a problem for some although central bankers around the world are trying to dismiss it as a past event; however, no one's quite sure whether inflation is really over the hump and going back to normal for good.
by:Robert Brusca
|in:Economy in Brief
Europe| Aug 29 2025
EMU Large Country Inflation Runs Cold – Over Tepid Cores
Inflation in the monetary union was tepid across the large, early-reporting, economies in August. The HICP rose by 0.2% on the month in Germany, rose by 0.1% in France, while it was flat in both Italy and Spain. However, these outstanding readings followed several months of stronger inflation; in particular in July German prices rose by 0.2%, in Italy the gauge rose by 0.3%, in France by 0.4%, and in Spain by 0.5%.

As a result, over three months, inflation is running hot on the headline gauge, over 2% in France, Italy, and Spain, and just below it, at a 1.8% annual rate in Germany. Over 12 months, inflation is well behaved, but that headline is up 0.8% in France, rises by 1.7% over 12 months in Italy, by 2.1% in Germany, and at a 2.6% pace in Spain. That is a bit more mixed but still quite solid set of results. The EMU-wide HICP for July – on a one-month lag- rises by 2.1% over 12 months with a core at 2.3%.

Core inflation is not well reported on an early basis. The Italian core rate rose 0.2% in August with Spain at 0.3%; both Italy and Spain logged increases of 0.3% in July and in June and as a result the 3-month inflation rate on the core for Italy and Spain runs at 2.7% in Italy and at 3.8% for Spain. These, of course, are much higher and more disturbing numbers for inflation. The 6-month inflation rate for core Italy and Spain runs at 2.9% and 3.1%, respectively, while over 12 months the Italian core is up by only 2.1% and the Spanish core is up by only 2.4%. The kick up and inflation for the core is a relatively recent phenomenon.
by:Robert Brusca
|in:Economy in Brief
Global| Aug 28 2025
Key Money Aggregates Stabilize Except in U.S. Where Growth Accelerates
Japan is a clear exception going, it alone on its money growth path. The United States, the United Kingdom, and the European Monetary Union have largely seen their money growth aggregates coordinated for annual growth in recent years. Money growth generally bottomed in 2023 with growth actually negative during part of that year. However, into 2024 money growth began to accelerate and it achieved positive growth. By the end of 2024, money growth rates had been restored to a moderate pace and money growth in the U.S., the U.K. and the European Monetary Union had mostly stabilized. However, in the last few months money growth in the U.S. has been accelerating. Money growth in the U.K. and the European Monetary Union has stabilized or weakened slightly. Money growth in Japan during all of this, has tended to decelerate marginally and now, in 2025, there is the slightest pickup in money growth in Japan to a still very weak pace.

Nominal money In the European Monetary Union, M2 growth has been at 1.1% over 3 years, 2.2% over 2 years and 3.2% over 1 year. Over shorter periods, six-months growth decelerated to 1.9% and over three months it decelerated further to about 1%, all at annual rates. Credit growth in the EMU has decelerated as well with private credit a little over 2% over six months and over 12 months, and the falling back to a 1.4% annual rate over three months.

The U.S. money growth progressed from 0.7% over 3 years, then 3.2% over 2 years, to 4.8% over 12 months. It moved up to 5.7% at an annual rate over six months and then moved up further to 5.8% at an annual rate over three months as nominal money growth continues to accelerate.

In the United Kingdom, money growth accelerated from 3-years to 2-years to 12-months from 1.3% to 2% to 3.3%. However, moving on to 6 months, U.K. money growth accelerated to 4.6% and then decelerated, downshifting to a 1.6% pace over 3 months complicating its true path.

In Japan, M2 plus CDs showed weak growth of 1.7% over 3 years, 1.2% over 2 years, and 1% over 12 months; over 6 months the annual growth rate sank to 0.3%, but over 3 months it has picked up to a 2.5% annual rate.

Real money balances Turning to real money balances, we find negative growth rates for money supply over 2 years and 3 years for the European Monetary Union, the U.K., and Japan. In addition, private credit growth in real terms in the EMU is negative over 2 years and 3 years. In the U.S., real money growth is -2.2% over 3 years, moving up to 0.3% over 2-years and then to 2% over 12 months.

The U.S. continues to be an exception with 6-month real money balances at a 3.7% annual rate and at a 3.5% annual rate over 3 months. In the EMU, real money balances are only growing 0.2% over 6 months and then fall back to drop at a 1.9% at an annual rate over 3 months. In the U.K., real money balances grow by 0.3% over 6 months and then fall 2.6% at an annual rate over 3 months. In Japan, real money balances decline 1.3% over 6 months and grow 0.4% over 3 months as money growth in Japan begins to stabilize slightly in real terms over 3 months.
by:Robert Brusca
|in:Economy in Brief
Germany| Aug 27 2025
German Climate Stabilizes But Eco-expectations Plunge
The GfK consumer climate indicator for Germany slipped in September to -23.6 from -21.7 in August. The slippage brings the index to its weakest level since April 2025 and in fact it's the weakest reading since May 2024 with only two-monthly exceptions.

The components for the GfK index are up to date through August. The economic index in August fell to -7.4, its weakest reading since December 2022. The decline in August was both sharp and deep. Income expectations backed-off; after a reading of 15.2 in July, the index fell to 4.1 in August and was last weaker in March 2025. The propensity to buy index weakened again for the second month in a row to -10.1 in August from -9.2 in July; it's the weakest reading since February 2025.

Percentile standings The percentile standing for the climate index and its components show climate is still very weak at a 9.7 percentile standing among data back to mid-2002. Economic expectations have a 23.7 percentile standing, the propensity to buy has a 28.8 percentile standing, while income expectations have a 38.8 percentile standing. These count percentiles or queue percentiles however you like to think of them, are all quite weak. The median in terms of this sort of gauge occurs at the 50th percentile reading, so all of these readings are well below their historic medians and data back to mid-2002.

Consumer confidence – selected other Europe Other European confidence measures are up to date through August in France where the INSEE confidence measure slipped to 87 from 88.3 while in the United Kingdom the confidence measure improved to -17 in August from -19 in July. Italy's confidence reading is up to date only through July, and on that timeline, it showed a one-month improvement to 97.2, up from June’s 96.1. Italian confidence has the strongest standing at a 76.8 percentile standing, the U.K. has a 40.3 percentile standing, while France has a 19.8 percentile standing. There's a good deal of variation in how consumers perceive current circumstances. Based on these standings, Germany has the lowest assessment in the its lower 10 percentile, while Italy sees a top 25 percentile standing, the U.K. sees an assessment that's about 10 percentile points below its median, while France is at its 20th percentile closer to the German metric in standing. It's a substantial variation especially since three of these countries are in the European Monetary Union.
by:Robert Brusca
|in:Economy in Brief
France| Aug 26 2025
French Consumer Confidence Weakens
Low confidence French consumer confidence as reported by INSEE fell to 86.98 in August from 88.31 in July; the standing leaves that reading in its 21.7 percentile of data back to August 2004. This reading, which hovers between the lower 20th percentile and the 25th percentile, clearly indicates weak conditions and assessments on the part of French consumers.

Living standards past and future are poor The assessment of living standards over the last 12 months weakened in August to -74.2 from an assessment of -70.8 in July. Past living standards have a percentile standing in their 17.8 percentile placing them in the lower 20th percent of their historic queue of data.

Living standards for the next 12 months, a more pertinent reading, slipped to -63.9 in August from -61.5 in July. While the negative reading isn't as deep as for the past 12 months, the ranking of that rating is even worse in its lower 4-percentile! The expected living standards over the next 12 months have been weaker only 4% of the time back to August 2004. That is certainly a worrisome development.

Unemployment is more feared Unemployment expectations for the next 12 months moved up to an index value 55.6 in August from 54.2 in July and have a 73.5 percentile standing- a top 30% standing among historic data back to August 2004.

Inflation pressures exist and are tepid The assessment of prices for the last 12 months weakened to -8.5 in August from -6.1 in July; the past 12 months’ assessment of prices has 43.9 percentile standing, slightly below its median for this backward-looking horizon. However, assessments of prices for the next 12 months have a -26 rating, a higher reading than -30 in July and -40 in June; that bears a standing in its 52.4 percentile, above its historic median indicating that some further inflation pressure is expected- a bit more than normal.

Favorability to save The favorability to save and the ability to save over the next 12 months had dipped slightly in August, but they have very high standings as the favorability to save has an 88.5 percentile standing and the ability to save over the next 12 months has a 96.8 percentile standing.

Spending environment is still solid The environment for spending is somewhat mixed although generally quite solid and positive. The exception is the favorability to buy a car which slipped slightly in August and has a 39.7 percentile standing for that response which means that it's only less favorable to buy a car about 40% of the time. However, the favorability for home purchases and housing renovation, while both of them increased slightly in August, have standings in their 78.6 percentile and 88.5 percentile, respectively. The favorability to buy consumer durables improved in July and stayed at that reading of -4 in August; the reading corresponds to a 76.2 percentile standing which is roughly a top 25 percentile response.
by:Robert Brusca
|in:Economy in Brief
Japan| Aug 15 2025
Japan’s IP: Stagnation Rules Despite Monthly Gain
Industrial production in Japan broke higher in June rising by 2.1% month-to-month after declining 0.2% in May and by 1% in April. Manufacturing output rose by 2.4% in June. Main manufacturing sectors show consumer goods output fell by 2.5% on the month, intermediate goods output rose by 1.3%, and investment goods output rose by 2.3%. Outside of manufacturing, mining output fell by 3.1% while utilities- gas and electric - output grew by 4.7%, erasing several months of declines.

Sequential growth rates show total industry output gaining momentum rising 2.8% over 12 months, at a 4.4% annual rate over six months and stepping back only slightly to a 3.6% growth rate over three months. Manufacturing output has been relatively firm and steady over 12 months, six months and three months. Consumer goods output has been more mercurial in its behavior, rising 3.8% over 12 months, stepping up to an 11.2% annual rate of expansion over six months but then falling at a 3.7% annual rate over three months. Intermediate goods output, on the other hand, has shown steady but slow-paced expansion, rising 0.1% over 12 months, at a 1% annual rate over six months and at a 0.8% annual rate over three months. Investment goods output has been accelerating; it has a surging 5.6% growth rate over 12 months, which steps up to 8.9% over six months and steps up again to a 13.6% annual rate over three months. The capital goods part of Japan's economy appears to be doing quite well in contrast mining where declines occur on all these horizons and at an accelerating pace of contraction. Electric utility & gas output accelerates through 12-months to 6-months to 3-months.

On a quarter-to-date basis, output grew at a 1.2% annual rate in the just-completed second quarter. Consumer goods output and intermediate goods output increased by less than 1% in the quarter while investment goods output rose at a 3.5% annual rate.

The far-right hand column shows the change in output compared to January 2020. The result shows negative numbers for all the entries in the table except for utilities usage which is up by only 6.4% over this 5 1/2-year period. However, output in the other sectors shows declines. There's been no increase - no net increase - in output over this 5 1/2-year span. This is a real testament to the kind of lethargy that Japan's economy has been through during this period.
by:Robert Brusca
|in:Economy in Brief
Global| Aug 14 2025
EMU IP Set-back in June
Consumer goods output in the European Monetary Union has been expanding since the second quarter of 2024; however, that has not been enough to bring expansion to output overall. Intermediate and capital goods output continue to be under duress. In June, overall IP output fell by 1.3%, manufacturing output fell by 1.6%, and the consumer goods sector, which has been the core of strength for output, declined on the month by 4.3%. Capital goods output fell 2.2% and the output of intermediate goods fell by 0.2%. All in all, it was a tough June for the industrial sector in the European Monetary Union.

Sequential growth rates Industrial output excluding construction gained 0.5% over 12 months, rose over six months at a 2.5% annual rate, and then experienced a sharp decline over three months as output fell at a 10.3% annual rate. Consumer goods output gained 5.1% over 12 months but declined at a 1.8% annual rate over six months and fell at an 8.6% pace over three months; both consumer durables and nondurable goods output are sharply lower over three months. Intermediate goods output fell by 1.9% over 12 months; it's flat over six months and then dropped at a 10.7% annual rate over three months. Capital goods output fell 2.2% over 12 months, gained 0.4% at an annual rate over six months, then fell sharply at a 9.7% pace over three months. To some extent, this is a tariff-related trend as firms in Europe had cranked-up output to get goods out ahead of the tariffs and now that we are in the actual tariff period output is being cut back to trend and to account for the previous surge. So, the reductions in output appear a little more draconian than the actual weakness in the economy - these are still trends to watch, however.

Ranking trends for growth Ranking 12-month growth rates show us a great deal of weakness in the growth of manufacturing output. The headline for output excluding construction has a 51.4 percentile standing on data back to late 2007. This means over this period, the pace of the output gains is slightly ahead of its median. The median for ranked data occurs at a ranking of 50%. Consumer goods output has an 88.3 percentile ranking for its growth rate that is created entirely by a 90.7 percentile growth rate ranking for consumer nondurable goods, since consumer durable goods have only a 20.6 percentile ranking. Intermediate goods’ growth rate has a 37.4 percentile ranking and capital goods have a 24.8 percentile ranking. The annual rates of output growth are weak except for nondurables in the consumer sector. For manufacturing overall, the ranking is in the 41.6 percentile, below its median.

Output trends since COVID Not surprisingly, if we look at output gains compared to January 2020 before COVID struck, only total consumer goods output and consumer goods output of nondurables have levels of output that are greater than what they created in January 2020. Overall output, however, is close to maintaining its performance from five years ago with current output at 98.5% of what it was in January 2020; manufacturing output is at 98.8% of what it was in January 2020 as well. The most lagging component is intermediate goods where output is only 88.4% of what it was in January 2020. All of the components are weak because they show output has not grown in over five years – except for consumer nondurables-all the other ratios are below 100%.

Country performance Among the 13 European Monetary Union members in the table for June, 6 of them show output declines in that month. That's an improvement from nine that declined in May and seven that showed declines in April. Despite the fact that overall output growth fell in June, the unweighted average across these reporting countries shows a median increase in output of 0.5% in June, up from -0.7% in May and -0.2% in April. The pooled country level statistics are not weighted for manufacturing or GDP importance. Germany continues to be one of the main reasons for economic weakness in the monetary union. Only Germany and Luxembourg show the declines on all three horizons of 12 months, 6 months, and 3 months.

Quarter-to-date The second quarter to date column which now is for the completed quarter shows the overall output and manufacturing output are declining on the quarter and in five reporting countries: Austria, Germany, the Netherlands, Malta, and Ireland.

Output growth by country The ranking of output growth shows rankings across these 13 countries that are above their median and data back to 2007 for all but four countries. However, one of those four lagging countries is Germany, and Germany's rank on the period is only in its 14th percentile – exceptionally weak. Germany, which has the largest manufacturing sector and is generally the powerhouse of Europe, is the main reason that the aggregate industrial production data for the EMU are so weak. Manufacturing in most of the rest of the monetary union is performing at a level better than its historic median; back to late 2007, there are only four exceptions, and Germany is the main one.
by:Robert Brusca
|in:Economy in Brief
Norway| Aug 13 2025
Norway’s Confidence Steps Back Up in Q3 After Q2 Stumble
In what is becoming a more common global story, confidence in Norway is rebounding after an earlier significant setback as countries recalibrate their circumstances under the revised Trump's tariff format. Norwegian consumer confidence had slipped in the second quarter to -19.1 from -5.4 in the first quarter, but now in the third quarter, confidence is snapping back to a -3.2 reading, the strongest reading since the first quarter of 2022.

Of course, there's a lot in the mix for this important northern European economy. Norway is an oil economy, and it also is one of the economies that is more vulnerable to relations with Russia. It has a relatively short but direct common border with Russia in the far north; otherwise, the borders are with Sweden and Finland. Still, with conditions in Russia touch and go and with Russian aircraft occasionally testing the air defenses the Baltic region, this is a geopolitically sensitive location.

On the economic front, inflation has been creeping up but the headline and core inflation rates are above the 2% mark and largely occupying space between 2.5% and 3%. Economic performance has been a bit uneven with the unemployment rate beginning to move up, as that rate has been notching steadily higher as 2025 has progressed. The last move by the central bank was to cut its key interest rate on site deposits. With the unemployment rate rising, there was little reaction in the bond market to this, especially in the environment where the manufacturing sector continues to be under pressure as it is for the most part globally with output in Norway contracting over the past two months (Y/Y).

Consumers’ rating of the environment for spending improved in the third quarter after deteriorating sharply in Q2. Its improvement brings it to a level above where it was in the first quarter as well; however, on ranked data back to the early 1990s the environment for making a major purchase still only has an 11.4 percentile standing, a relatively weak performance.

The assessment of the overall economy for the next year improved sharply once again after falling sharply in the second quarter. This metric had a value of 5.1 in the first quarter that slipped back to -21.2 in the second quarter; since then, the third quarter has gained some of that back at a survey reading of -3.3. It's still not back to its first quarter level, and it still is a reading that represents relatively weak performance as it has a 28.8 percentile standing which leaves it clearly in the bottom third of its queue of values since the early 1990s.

However, the personal finance readings do pick up for conditions expected for next year as the index evolves from a reading of 21.5 in the first quarter to 11.2 in the second quarter and back up to 21.8 in the third quarter of 2025. This reading brings the personal finance assessment to a 47-percentile standing, just slightly below its median for the period; at a level of 21.8, it's above its mean value of 20.1 for the period. This news on the personal finance front is better than anywhere else in the survey.

Consumer confidence is also rated according to age. And while there are some differences among the age-cohorts, for the most part they move and evaluated in unison. The queue rankings range from 16.7% (with the youngest growth at the low end) to 25.8% with the oldest group at the high end. Over 4 quarters, the changes in the age-cohort evaluations range from +11.1 to +18.7.
by:Robert Brusca
|in:Economy in Brief
Global| Aug 12 2025
ZEW Survey Shows Reduced Expectations on Tariff Deal
Macro-expectations- The ZEW financial experts registered disappointment this month in the tariff deal that the European Community struck with the United States. Macroeconomic expectations in August for Germany were slashed back to a reading of 34.7 in August from 52.7 in July; for the United States, expectations also were cut to -41.2 from -34.2. These two sets of reductions brought German expectations to a 60.8 percentile standing, leaving them still above their median on data back to the early 1990s. The U.S. reading has a much lower, 9.3 percentile standing on the same timeline. Despite the ZEW experts’ opinion that the tariff deal is bad for Europe, it apparently doesn't boost expectations for the U.S. at all. This, of course, makes me wonder to what extent the forecast has a bit of sour grapes to it.

The economic situation- The economic situation also deteriorates this month with the euro area assessment falling to -31.2 from -24.2 in July. Germany's assessment falls to -68.6 from -59.5 as the tariff deal weighs on Europe and Germany. The current situation for the U.S. improves marginally to +0.1 in August from -5.9 in July. These new readings leave the euro area economic situation reading with a ranking in its 46.9 percentile, Germany ranks in its 22.2 percentile, and the U.S. stands in its 35.1 percentile.

Inflation expectations- Inflation expectations in Europe remain low but increased to some extent in the U.S. where they were already high. The European readings for the euro area fell back to -6.7 in August from -5.8 in July. For Germany, the reading was little changed at -5.1 in August from -5.2 in July. The U,S, rating moved up to +74.5 in August from +64.3 in July. The queue standings for these metrics show the euro area inflation expectations standing in its 27th percentile, the same as for Germany, but for the United States inflation expectations are up to their 95.9 percentile! This is an extremely interesting angle from the ZEW financial experts because we have the Fed in the U.S. poised to cut interest rates. We have the President pushing the Fed to cut interest rates more quickly and more deeply than it wants to do it. And despite the fact that inflation has run over target for four and a quarter years in the U.S., we have the Fed seemingly ready to cut interest rates, perhaps twice by the end of the year, even with the potential for inflation from tariffs knocking at the door. The ZEW experts ‘take’ on the U.S. and its financial situation seems to be quite different from how it's being analyzed in the United States.

Short-term interest rates- Short-term interest rate expectations for the euro area show less of an inclination for rates to fall with the -35.7 reading in August compared to -49.7 in July. For the U.S., the -61.5 reading is lower than July's -43.8, indicating that expectations for rate cuts in the U.S. are growing. The euro area short-term rate expectation has an 18.4 percentile standing whereas in the U.S. the standing is at its 10.4 percentile.

Long-term rate expectations- Long-term interest rates found reductions both in Germany and the U.S. in August. German expectations fell to an index reading of 19.0 from 26.1 in July. In the U.S., the reading fell to 26.4 from 38.7. The queue standings for the German rate are in their 25.5 percentile, below the U.S. where the percentile standing is at its 32nd percentile. In both cases, the expectations for long rates indicate a good deal of moderation. Queue standings well below their respective median readings for both Germany and the U.S. (remembering that the medians for ranked data occur at the 50th percentile mark).

Stocks- Stock market expectations were slightly weaker in Europe with the euro area falling to 18.1 in August from 22.4 in July. The German reading fell back to 18.5 from 24.6, while the U.S. reading is little changed at 8.4 compared to 8.6 in July. The standings for all of these readings are around the 15th percentile; there are small differences among the different reporters, but nothing of significance.
by:Robert Brusca
|in:Economy in Brief
Europe| Aug 11 2025
Inflation: Better-Contained in EMU - Part of Along Road of Progress
As more updated inflation data continue to post, we can look back at EMU historic inflation performance and try to gain some perspective. Since the euro area went to single currency status and set a program in motion for replacing domestic currencies (whose exchange rates were by then locked) with the euro-currency unit, there has been a lot of shifting of inflation and in relative prices among members. In the early days, there was a lot of concern about that and about entry level inflation commitments in the community.

On a to-date basis, despite the recent loss of control over inflation (in the wake of COVID and the Russian invasion of Ukraine) which the ECB has now mostly – but not fully- contained, core inflation in the EMU still runs hot and does so somewhat broadly. Still, headline inflation in the euro area has run at a compounded annual rate of 2.1% since January 1999, very close to its original 2% commitment.

Current headline inflation rates among early reporting and early EMU members (11-countries) show year-on-year inflation at 2.4% or higher in six of them- highest at 3.5% in Austria.

Since currencies were bound together and blended into the euro in January 1999, price levels among these members have risen in differing magnitudes, ranging from 92% in Luxembourg to 63% in France. That leaves a lot of potential for competitiveness gaps between those countries depending on the industries that most responsible for the price-level rise differences.

Price levels have risen more slowly than for the EMU overall in France, Finland, Ireland, Germany, and Italy. When the EMU was first being implemented, there were massive and chronic inflation differences between hard money countries like Germany, the Netherlands, Finland and a few others. The Mediterranean countries including France, Spain, Portugal, Italy, and Greece had typically run much higher rates of inflation. However, after over a quarter century in the cauldron of monetary singularity, we find that Spain and Portugal have averaged inflation rates of 2.4% and 2.2% while the EMU has averaged a pace of 2.1% during the period. Italy has averaged 2.1%. These are tightly clustered results.

The Monetary Union has had its difficulties, its tensions, its debt crises, and has withstood an influx of migrate that created tensions in the area (an influx that cost former EU member the U.K. its membership). But in the end, current inflation rates are mostly in alignment and so do not seem to display much more variation that the sorts of inflation rate difference you see among various states within the United States. The worst start-to-date inflation performance is in Luxembourg at 2.5% -and that probably matters the least since it is a financial center and does not compete much in manufacturing.

The far-right hand column in the table ‘memorializes’ history by showing the largest divergence between German inflation and each member over this history back to 1999. The current largest one-year inflation rate gap with Germany is Austria at 1.5% but after that it is Spain at 0.6% and then Portugal, Luxembourg, and Belgium -all at 0.5%. These gaps bear no relationship to the historic annual discrepancies as large as 28%. Four countries have their largest discrepancy with Germany annual inflation at over 20%; the others are greater than 15% but less than 20%.

For reference, I include the United States and the United Kingdom at the bottom of the table. They are two peas-in-a-pod with aggregate price levels rising over 90% each over this period. We can see the impact of that on the dollar’s value as well as on the value of the pound sterling over this period. If exchange rates are locked (as in the EMU), domestic prices are forced to rationalize themselves in the domestic economy. If exchange rates are left to fluctuate, the pressure on the domestic price level to adjust is alleviated because the exchange rate can adjust instead. Forcing adjustments in prices through a domestic chain of events is usually more painful than undergoing exchange rate change and, the later, simply change all prices in unison at least those for tradeable goods.
by:Robert Brusca
|in:Economy in Brief