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

Denmark| Jan 23 2024
Denmark Shows Confidence Improvement; Confidence Metrics Get Slightly Less Negative: Less Unhappy New Year
Something’s less rotten in Denmark Denmark's consumer confidence indicator to start the New Year improved to -8.4 in January from -13 in December. The net negatives still rule; however, the reading is less net negative in January than it was in December 2023. We start 2024 being grateful for small changes in the right direction.

Looking at the averages, the Danish consumer confidence indicator over 12 months displays an average value of -14.2, over six months the average is -11.2, and over three months the average is -10.6. This is a clear progression toward improvement and even more striking when we look back at the previous 12 months, the older 12-month average was -24.2. In addition to that, when we look at the January 2024 reading compared to the three-month average, we see that progress is still in-train. Signs of progress proliferate but curb your enthusiasm, as there is a long way to go to expunge negativism.

Monthly Survey Responses Survey respondents in January assess that the financial situation for the last 12 months was slightly worse than it had been in December; however, for the more important financial situation over the next 12 months, they see an improvement with the index rising to +4.9 from +1 in December. The general economy over the last 12 months was assessed to have improved to a -10 reading compared to -17.4 in December. The general economy reading as expected for the next 12 months moves up to -3.6 from -6.6 in December. The assessment of consumer prices over the last 12 months shows a weaker reading in January than in December; however, for the next 12 months there's some acceleration expected with the January reading at +2.8 compared to December at -2.5. Unemployment trends for the next 12 months are seen as improving: the response value of +10.7 in January is down from +13.9 in December.

The perceived environment The Danish survey also gives us certain environmental factors that consumers assess. The favorability of time to purchase (now), for example, improved in January to -21.6 from -24.3 in December. The favorability of time to purchase in the next 12 months also improved to a -7.3 in January from -8.3 in December. The favorability of time to save at present worsens slightly in January compared to December; the favorability to save over the next 12 months also deteriorates. The general financial situation of households now is assessed as improved at +20.7 up from +18.5 in December, but that still leaves it below its November value of +23. And as we shall see below, ‘better’ is an improvement but does not necessarily make conditions ‘good.’

Steady progress... The categories that are making steady progress to better levels are the financial situation over the last 12 months, the financial situation over the next 12 months, the general economy over the last 12 months, pressure on consumer prices over the next 12 months. There is also improvement in lowering expected unemployment trends, and the favorability of the time to purchase at present and the favorability of the time to purchase in the next 12 months (the latter, despite a monthly deterioration) both are carrying positive momentum. And the favorability of time to save at present has been trending higher as well. That’s a lot of ‘trending higher.’

Still some key deterioration However, the general financial situation of households at present has been deteriorating steadily but slowly from 12-months to six-months, to three-months. Past consumer price inflation, similarly, had been weakening on that progression.

Rankings for confidence metrics: where they stand We have to look at how the metrics have changed monthly, and how they are trending more broadly. Next, we look at where they stand in a queue of ranked values back to the mid-1990s. The far-right hand column sets the current consumer confidence indexes in a grid of rankings and data back to 1995. On that score, the only readings above a 50% mark which represents the median over this period, are consumer prices over the last 12 months and unemployment trends over the next 12 months. Fortunately, the unemployment trends are working to lowered expectations sequentially; however, despite that trend, the level of unemployment expectations (fears) is still nearly a top 25-percentile reading. Meanwhile, things like the general financial situation of households carries a ranking around its 5th percentile- overall an extremely weak ranking. The favorability of time to make purchases at present has a 9.1 percentile standing! The financial situation currently, as well as over the last 12 months, shows standings in the lower ten percentile range.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Jan 19 2024
U.K. Retail Sales and Sales Volumes Shrink in December
U.K. retail sales fell by 3.6% in December after rising 1.1% in November and rising modestly in October. The progression of nominal retail sales growth shows sales up by 0.5% over 12 months, falling at a 5.2% annual rate over six months and falling at a 9.3% annual rate over three months. On a sequential basis, retail sales have been falling at an accelerating pace. Over the sequential basis as well, The CPI-H in the U.K. rose 4.2% over 12 months, decelerated to a 2.2% annual rate over six months, and then crept higher by 0.9% at an annual rate over three months completing the deceleration cycle. Inflation gave sales a positive push over each of these horizons but a sequentially smaller push from 12-months, to six-months, to three-months.

Sales volumes- Not surprisingly these conditions have led to weakness and declines in real retail sales, which we can also refer to as retail sales volume. Retail volumes fell by 3.3% in December, after rising by 1.5% in November, and falling by 0.1% in October. Sequentially, the progression of retail sales is weakening as retail volumes fell by 2.5% over 12 months, then fell at a 7.2% annual rate over six months, and then fell at a faster 7.7% annual rate over three months.

Passenger car registrations- In addition to weakness in retail volumes, passenger car registrations have fallen in each of the last three months; sequentially, passenger car sales are getting much weaker. Passenger car registrations year-over-year are up by 9%, but over six months they're falling at a 2.8% annual rate, and over three months registrations are falling at a 21.4% annual rate. This is substantial and growing weakness in passenger car registrations implying also significant weakness in sales.

U.K. retail surveys- In addition to these statistics on actual retail and car sales, we can look at a few the surveys on the U.K. economy. The Confederation of British Industry (CBI) metric for sales this time of year fell by 9 points in December, after falling six points in November, and falling 15 points in October. The CBI survey for the volume of orders year-over-year fell by 32 points in December after rising by 15 points in November and falling by 18 points in October. GfK consumer confidence survey rose by two points in December after rising 6 points in November and falling by 9 points in October.

Sequential performance of surveys- Next we can track these survey metrics sequentially from 12-months to six-months to three-months. The CBI survey for retail sales for ‘time of year,’ essentially a seasonally adjusted concept, shows growing weakness. The survey drops 22 points over 12-months, logs a drop of 26 points over six months, and a drop of 30 points over three months. The CBI survey for the volume of orders, looking at the year-over-year changes, also shows persistent negative numbers with a decline of 33 points over 12 months, a decline of 44 points over six months, and then a substantial decline of 35 points over three months. The GfK confidence survey rises by 20 points over 12 months but then gains just two points over six months, and falls by one point over three months. The surveys reinforces the idea of sales being on a weakening trend and being currently under downward pressure.

Quarter-to-date- These statistics are for December and complete the data for quarter; The quarter-to-date U.K. retail sales change fell by 0.9%, but sales volumes fell more sharply, at an annual rate of 3.5%. Passenger car registrations fell at an annual rate of 17.3%. The CBI survey for retail sales for the time of year is 15.3 points weaker than it was in the third quarter; the survey for the volume of orders year-over-year is weaker by 6 points than it was in the third quarter; the GfK consumer confidence index is unchanged on the quarter compared to the one quarter ago average.

Percentile standings- As a final evaluation we can rank sales growth historically and on data back to 2002. When we do this, the ranking of the U.K. sales rate is in its lower 10th percentile; retail volume is also weak, in its lower 9.7 percentile, about the same relative standing as for nominal retail sales. Passenger car registrations year-over-year still carry a relatively high-ranking in their 77.8 percentile, but registrations are weakening sequentially, so this ranking is under downward pressure. The ranking the levels of the CBI surveys show retail sales for the time of year with the 17.1 percentile standing, CBI order volume growth year-over-year is at an anemic 1.6% standing, and the GfK consumer confidence index at a 30.4 percentile standing.
by:Robert Brusca
|in:Economy in Brief
Japan| Jan 18 2024
Industrial Production Declines in Japan in November
Industrial production in Japan fell by 1.3% in November; manufacturing alone also saw industrial production falling by 1.3% in November. For total industry, production is accelerating as 12-month growth is falling by 1.2%, but growth over six months rises at a 3.7% annual rate, and growth over three months rises at a 4.3% annual rate. For manufacturing, it's almost the same picture with output down by 1.3% over 12 months, but then the annual rate of expansion jumps to 5.6% over six months, but subsequently backtracks slightly to a 5.2% annual rate over three months. The picture from manufacturing is really the same for total industry except for some decimal points; it shows that manufacturing output goes from declining over 12 months to expanding at a strong pace over three months and six months.

The strengthening trend in output is not reflected in each of the three main manufacturing sectors of consumer goods, intermediate goods, and investment goods. Consumer goods do show a general improvement. There is a rebound with growth of 1.8% over 12 months, jumping strongly to rise 15.7% at an annual rate over three months. But the in-between measure, over six months, has industrial production falling at a 4.7% annual rate. Still, the bottom line for consumer goods output is that output has accelerated over three months compared to 12 months. For intermediate goods, there's an accelerating progression as growth falls by 0.8% over 12 months, advances at a 5.2% annual rate over six months, and then accelerates further to a 6% annual rate over three months. Investment goods go in the opposite direction. The sector does not quite stand up to become a sequential deceleration, but it's close to that with output falling by 5.4% over 12 months, then output falls, at a very elevated -15.9% annual rate over six months, then the decline slows but it is still a decline in double digits at a -11.7% at an annual rate over three months. All of this helps to confuse the true trend for industrial production in Japan. Investment goods seem to be suffering from the global growth malaise.

The chart at the top shows that if we plot growth rates for Japan of 12-months, six-months, and three-months, over the past six months or so, output on most of these gauges has been consistently declining or weakening. That chart concentrates on comparing three-month growth to three-month growth, six-month growth to six-month growth and 12-month growth to 12-month growth. The growth rates connect the dots (literally) along the same growth horizons treating them as time-series rather than jumping between these tenors to compare three-months to six-months to 12-months. The time-series graphic presentation of the growth data makes developing trends seem weaker than they appear in the table that compares growth across tenors.

In the quarter to date (QTD), there has been strong revival for overall industrial production that is growing at a 7.5% annual rate two months into the fourth quarter; manufacturing is growing at an 8.2% annual rate QTD. Consumer goods output two months into this quarter is growing at an 18.4% annual rate with their intermediate goods growing at an 8.2% annual rate; investment goods output is contracting at a 6.8% annual rate.

Industrial production in Japan has been struggling after COVID struck. The far-right hand column calculates aggregate growth from today's index to the index that prevailed in January 2020; for all the industry and sector measures in the table, output is lower than it was in January 2020 except for the utilities, electric and gas. That is net lower output over a period of nearly three years for most industries and sectors.
by:Robert Brusca
|in:Economy in Brief
Global| Jan 16 2024
ZEW: Economic Situation Improves on the Month in the Euro Area and the U.S.
The ZEW economic situation in January 2024 improved in the euro area and in the United States as it deteriorated in Germany. Two of the three metrics retain large negative readings and all three remained very weak in their respective historic queue of data.

The euro area economic situation improved from -62.7 in December to -59.3 in January. The U.S. situation improved from +7.8 in December to a stronger +15.3 in January, while Germany slipped from -77.1 in December to marginally weaker -77.3 this month. The U.S. current situation is the best of the lot, but still below its historic median with a ranking at its 42.2 percentile, below its median which occurs at a percentile ranking of 50. The euro area has a ranking in its 25.9 percentile and Germany has a ranking in its 14-percentile.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Jan 12 2024
U.K. IP Struggles to Log Monthly Gain
U.K. manufacturing output rose by 0.4% in November after falling by 1.3% in October and falling by 0.4% in September. Sequentially, manufacturing output is weakening; it advances by 1.2% year-over-year, the growth rate shrinks to zero over six months and shrinks further to a -5% annual rate over three months.

Trends for output by sector are somewhat complicated with recent months not providing a very clear picture. Among the observations for consumer durables and nondurables output, intermediate goods, and capital goods, only the capital goods industry shows a decline in November. However, manufacturing and all these sectors and subsectors showed declines in October, while in September only consumer durable goods showed an increase along with a minor rise in consumer nondurable goods, intermediate goods show another relatively sharp decline and capital goods were flat.

Sequential growth rates from 12-months to six-months to three-months, as already mentioned, reveal a steady deceleration in the growth rates for manufacturing. But this is not so clearly expressed across the sectors, as consumer durables and nondurables show unclear patterns and only intermediate goods and capital goods output succumb to the pattern of sequential worsening deterioration. Consumer nondurables, in fact, show positive-growth rates on all horizons.

Upon turning to quarter-to-date calculations that compare the annualized growth rates two months into the fourth quarter with the average for the third quarter, we find negative growth in all the components in the table, except under ‘industry-detail’ there, food, beverages & tobacco show a hearty gain.

To get an idea of how tight production might be, I look at current output levels as a percent of their maximum output on data back to 2010. Manufacturing is at 90% of its past peak on this period. Consumer durables is at 94% of its peak, nondurables at nearly 97% of their peak. Not surprisingly, food, beverages & tobacco, which tend to be very trend-dominated, are essentially at their peak reading at a 99.9 percentile standing (stronger only in May 2022). The weakest standing is for mining & quarrying at a 43.7 percentile mark. And surprisingly the utility usage for gas, electricity & water has only 53.6% of its past cycle peak.

The column to the far right looks at the simple percent change in current output compared to levels on January 2020 before the pandemic struck. Output is lower for manufacturing overall by nearly 5% and is higher only for consumer durables (by 1.2%) and consumer nondurables (by 13.9%). For more detailed industries, food, beverages & tobacco are higher by 16.9%, textile & leather output is higher by a very strong 43.6%, motor vehicle & trailer output is higher by 3.2%. Mining & quarrying output is lower by 38.8%. Utility output is lower by 42.2%. This is an astonishingly strong decline as utilities service ongoing activity and growth and except for very small margins is not inventoriable.
by:Robert Brusca
|in:Economy in Brief
Europe| Jan 09 2024
Roller Coaster Unemployment Rate Ride: At an All-time Low in EMU
The unemployment rate in the European Monetary Union in November 2023 is tied for its all-time low, a low reached in June 2023. The percentile standing of the unemployment rate puts it in its 0.3 percentile, lower than any of the EMU countries in the table. Within the Monetary Union, Belgium's unemployment rate stands at its 10.8 percentile, the same as Germany’s. In France the unemployment rate has a 6.4 percentile standing, and the Dutch unemployment rate has a 9.3 percentile standing. The United States where the unemployment rate is within a stone’s throw of a 50-year low is at its 8.4-percentile. Japan, that chronically runs very low unemployment rates, has its rate at its 16.5 percentile.

Historically low rates of unemployment- The only entries in the table with unemployment rate above their historic median are the United Kingdom where the claimant rate is at its 61.6 percentile. The European Monetary Union member country that has an above-median unemployment rate is Luxembourg, a very small country with the concentration of jobs in the services sector and in the financial sector. Its unemployment rate has an 81.7 percentile standing, although it has the sixth lowest reported unemployment rate among the twelve countries in the table. Traditionally, Luxembourg has run a relative low rate of unemployment, that accounts for the relatively high standing of a union-wide moderate unemployment rate.

The EMU rate falls on balance over 12-months- The unemployment rate for the European Monetary Union in November has fallen over 12 months by 0.3 percentage points while looking at the member countries on the table only five of twelve countries in the table have seen their own unemployment rates fall over 12 months. This EMU-wide rate falls because countries with falling unemployment rates generally had relatively sizable drops over 12 months while the large countries reporting in the table such as Germany and France and moderately sized Portugal, each had an unemployment rate increase of just 0.1 percentage point over 12 months.

Still, rate declines appear to less common- However, looking at monthly patterns, we see four countries with unemployment rates declining in November, only three with the unemployment rates declining in October, and only one with employment rate declining in September. Unemployment rates were unchanged in November in four countries, in October six countries had unemployment rates unchanged from their level in September, and in September six countries had unemployment rate levels unchanged from their level in August. The declines in the unemployment rate are becoming rarer in the monetary union and that's not surprising when looking at the historic rankings and the current low levels of unemployment rates.

Paradox of the lower EMU standing than for any member country- The unemployment rate and the monetary union has a much lower ranking than for individual member countries because it's the coincidence of having low rates and all the countries. That synchronization is responsible for making the EMU overall unemployment rate rank so low. Having only the smallest country listed in the table with an unemployment rate above its median clearly underscores how widespread low unemployment has become across the monetary union.
by:Robert Brusca
|in:Economy in Brief
Europe| Jan 08 2024
EU Commission Indexes Bounce to End 2023
The EU Commission indexes for the European Monetary Union's (EMU) performance in December show an overall index improving to 96.4 from 94 in November. This continues a string of improvements that has been underway. The improvements run across most sectors although there's more flattening than improving going on – still, that's good news. Compared to September, for example, the overall index is stronger by nearly three points, the industrial index is unchanged, consumer confidence is better by nearly three points, the retail sector is unchanged, and construction is improved by two points, and the services sector is better by three points. These are small changes over a period of three months; still, they represent stability or improvement across the board.

The country level data have been improving as well. In December, only five of the seventeen early reporting countries show deceleration month-to-month. This is the same number as deteriorated for this group in November. However, in October eleven of these seventeen countries showed deterioration.

The rank standings for the industries are dominated by weakness in the industrial sector and consumer confidence. The industrial sector has a 31.2 percentile standing, consumer confidence has a 21.9 percentile standing and these have strong weights to cause the overall index for the EMU to have only a 34.8 percentile standing. This is despite retailing having a 59.4 percentile standing, construction a 74.3 percentile standing, and the services sector at a 55.2 percentile standing. Three of the EMU sector indexes have standings above their medians (rankings above 50%) while two have standings that are weaker than their medians.

Looking at the same statistics for countries, there are only four country standings above their 50th percentiles. All of those are small countries: Greece has a 61.2 percentile standing, Cyprus has a 62.7 percentile standing, Malta has a 60.1 percentile outstanding, and Lithuania has a 56.6 percentile standing. Germany, the largest economy in the monetary union, ranks 14th among the seventeen early-reporting countries, France ranks seventh, Italy 6th, and Spain 5th. Germany and France tend to be two of the strongest economies in the monetary union; however, among the four largest countries they have the weakest percentile standings, with Germany logging a percentile standing at 21% and France at about 35%.
by:Robert Brusca
|in:Economy in Brief
USA| Jan 05 2024
EMU Inflation Rate Continues Low- But Is the Pace of Decline Deescalating?
Inflation in the European Monetary Union rose 0.6% in December (as implied by the flash rate) after falling 0.2% in November. Still, the sequential inflation rates show deceleration in progress with the 3-month pace at 0.3%, the 6-month pace at 2.5%, and the 12-month pace at 2.9%. The annual rate of expansion for inflation is clearly in a deescalating mode as 2023 ends. Hooray!

However, will the end of 2023 also be end of that good news?

Sequential inflation rates for Germany, France, Italy, and Spain show decelerations from 12 months compared to 12 months ago and for 3 months compared to 6 months ago, but the middle picture of inflation over 6 months compared to 12 months ago is mixed, with Germany and France showing inflation continuing to decelerate marking a full trend deceleration for the year, while Italy and Spain saw some inflation pick up between 12 months and 6 months. In the case of Italy, it was a minor uptick where the year-over-year inflation rate was 0.5% and the 6-month pace moved up to 0.7%. That can almost be written off as rounding error especially since the next sequential 3-month inflation rate subsequently collapsed falling at a 3.5% annual rate. In Spain, the backtrack is a little bit more substantial as the 12-month inflation rate at 3.3% moved up to a 4.5% annual rate pace over 6 months, more than a percentage point of acceleration, but then fell sharply and declined at a 1% annual rate over 3 months.

All these trends appear to be quite solid and headed on the deceleration path. If we look at the bottom of the table, there I memorialize Italian core inflation and German inflation excluding energy. There, once again, we see for Germany the ex-energy inflation rate, as we move the calculation to shorter horizons, goes from 3.6% to 2.5% to 2.1% - a clear decelerating path. Italy does exactly the same thing in a lower register with inflation at 3.2% over 12 months, decelerating to 1.2% over 6 months, and then going dead flat over 3 months. When energy prices are removed, the inflation picture remains quite good and that's significant because during this period oil prices have been falling. Brent prices fell 2.9% in October, 9.2% in November, and 6.3% in December. Over the last three months, Brent prices expressed in euros have been falling at a 53% annual rate. Clearly, the ECB’s inflation fight has a tailwind.
by:Robert Brusca
|in:Economy in Brief
USA| Jan 04 2024
Composite PMIs Show Very Minor Improvement in December
The composite global PMIs over a group of twenty-five countries and regions in December shows some very slight improvement. The average unweighted composite PMI overall moves up to 51.0 from 50.5 in November and from 50.2 in October. The median PMI in December moves to 50.4, up from 50.1 in November and 50.0 in October. These shifts are clear, if also exceedingly microscopic, improvements in the monthly PMIs. • Among these twenty-five jurisdictions, eight of them worsened in December compared to November; November had seen twelve worsen month-to-month, and October saw sixteen worsen compared to September. • We can also account for values above and below 50 since 50 is the separating line between a PMI indication of expansion vs. contraction. In December, eleven composite PMIs were below 50, the same as November, while thirteen were below 50 in October. • On balance, the average and the median PMIs show some improvement in December as well as the tendencies to slow and the tendency to contract. However, the change in these tendencies month-to-month is small.

We can engage these same metrics looking at 3-month, 6-month and 12-month averages of the underlying data. Looked at this way: • The average PMI weakens over 3 months compared to 6 months and weakens over 6 months compared to 12 months as well as over 12 months compared to 12 months ago. • The median is unchanged in three months compared to six months; over six months it's weaker than it was over 12 months. • Slowing propensities show no clear pattern as twelve jurisdictions slow over 12 months, which steps up to eighteen over 6 months but then drops back to thirteen over 3 months. There is no clear pattern there. • As for jurisdictions below 50, there's a slight tendency to worsen but no clear sense of direction as eight jurisdictions are below 50 over 12 months, that steps up to eleven below 50 over 6 months, and that drops back to ten being below 50 over 3 months.

The queue (or rank) standings The queue percentile standings have been becoming slightly more equivocal than they were. Eleven of the queue standings that assess growth from the period dating back to January 2019, a 60-month observation period, have values above 50, indicating that the metrics in December 2023 are above their medians for this period. The other fourteen have values that are below 50 indicating sub-par performance. The average queue percentile standing is at 45.9, an average that's below the median of 50. The median of the queue standings in December is at 35, significantly lower and indicating more chronic weakness than the average metric. Out of the twenty-five observations, five are in the lower quartile of their historic queue of data and five are in the upper quartile of their historic queue of data, relative balance.

The readings on balance are weak and the tendencies for weakness, contraction, below median performance, and slowing are still substantial even though they may not all be dominating the other trends. For example, in December, having eleven out of twenty-five of these observations showing contraction is a bad result, but that’s less than half of them. Having eight of twenty-five slowing certainly indicates that less than half of them are slowing; however, eight out of twenty-five is still a large proportion that is weakening. And this occurs with the average and median PMI values in December just barely above 50: the average at 51 the median at 50.4. Moreover, weakness is more concentrated among the larger most developed economies magnifying that weakness.
by:Robert Brusca
|in:Economy in Brief
Germany| Jan 03 2024
German Registered Unemployment Rises in December
The registered unemployment rate in Germany in December ticked up to 5.9% after logging 5.8% in October and in November. The registered rate has been moving up slowly throughout the year. The number of people unemployed increased 0.2% in December, a slowdown from the 0.8% rise in November and the 1.1% increase logged in October. Over 12 months, to six months, to 3 months, the annualized increase in unemployment is rising at a faster rate, as it has increased by 7.4% over 12 months, at a slower 7% pace over six months, then reaccelerated to an 8.6% annual rate over three months.

Wages in Germany lag behind the unemployment statistics and are up-to-date through October. On that cut-off date, the 3-month change in wages shows a drop at a 4.4% annual rate although wages are still up by 4.6% over 12 months. Real wages are up by 0.9% over 12 months but down at a 7.3% annual rate over the last three months. With the unemployment rate rising, there is less support for the labor market and wages are showing that weakness.
by:Robert Brusca
|in:Economy in Brief
Global| Jan 02 2024
S&P Global Manufacturing PMIs Ease Globally in December
The manufacturing global PMIs from Standard & Poor’s show deterioration in December compared to November as 2023 draws to a close. The median reading among countries in the table is 47.9, a level below 50 indicating contraction in the manufacturing sector as represented by the median standing. The median in December also declined from its value in November, which was 48.3. In November, previously, the median PMI had declined from its 48.7 reading in October. Slow but steady erosion is still in train over these two months.

Looking at data more broadly over 12 month, six month and three month periods, there's very little change in the median. The median for the 12-month average is at 48.7; that increases to 48.8 over six months but then falls back to 48.4 over three months. The median over these periods has actually been trapped at a low reading below the 50% mark, indicating moderate contraction. There's been a persisting situation over the last year that shows slight erosion and it has not changed very much as the year has progressed.

In addition to the median, we can look at breadth; breadth tells us the proportion of readings with improving or deteriorating trends over some set period. Over 12 months compared to a year ago, the diffusion statistic is 61.1. Since it's over 50, it indicates that more than half of reporting countries were showing improvement on that timeline. Over six months compared to 12 months, diffusion falls to 55.6. That depicts reduced breadth, but it still shows that over half of the reporting countries were improving over six months compared to 12 months. Over three months, the breadth figure falls to 44.4%; this figure is below 50% and indicates that relatively more reporters are showing weakening readings over three months compared to six months.

Ranking data provide more perspective on what these readings mean. Breadth data summarize trends across all reporters. Ranking data evaluate each reporting unit agist its own recent timeline. The ranking data place the current month’s estimate in a queue of data from January 2019. This is a five-year period. Over this span, only five of the eighteen countries (or areas) from the table have standings above their 50th percentile, which means only five of them have standings above their historic medians. The highest queue standing is reported by Russia at the 98.3 percentile mark which is also its the strongest reading over this period. And because it's involved in war, this is probably not a truthful figure on Russia's part. Mexico has a 90-percentile standing. India has a 70-percentile standing; that's based on its November value. South Korea has a 58-percentile standing. However, the median for the group of 18 countries stands only at its 20.8 percentile, right at the lower fifth of its queue of reported data, obviously a very weak reading overall.

Vetting data from just before Covid struck from January 2020 to date, there are only four countries that report improvements in their manufacturing PMIs over this period. Russia, of course, reports the greatest increase at 6.7 points, Mexico shows a 3-point gain, Indonesia reports a 2.9-point gain, and South Korea shows a small 0.2-point gain. The median for the group is a decline of 1.8 points over this period.
by:Robert Brusca
|in:Economy in Brief
Japan| Dec 28 2023
Japan’s Production Contracts in November after a Strong October
Industrial production in Japan fell by 1.3% in November after rising by 2.2% in October. Japan's production profile, however, shows an acceleration is in progress. Over 12 months production falls by 1.2%, over 6 months output is rising at a 3.7% annual rate, and over 3 months it's rising at an even stronger, at a 4.3% annual rate.

Manufacturing: The manufacturing sector echoes the results in the trends of the headline. Manufacturing IP is close to showing acceleration in progress but for a technical shortfall. Manufacturing output falls by 1.3% over 12 months, then it accelerates at a strong 5.6% annual rate, although there's a slight set-back to trend as the 3-month growth rate recedes to 5.2%; the 3-month and 6-month growth rates are nearly identical and much stronger than the year-over-year growth rate. Technically I can't say that this is ongoing acceleration, but it's certainly a strong picture for manufacturing output.

Product Group Performance: Product group results in Japan in November show widespread declines with a decline of 2.2% in consumer goods output, a decline of 0.1% in intermediate goods output, and a decline of 2.2% in investment goods output. All of these are changes, and are, for the most part, reversals, from the output that the sectors reported in October as consumer goods output expanded by over 5%, intermediate goods output expanded by 1.4%, and investment goods output was flat.

Sequential Growth trends by Sector: Checking the sector results for sequential trends and acceleration, we find: • Acceleration in intermediate goods where output falls by 0.9% over 12 months, rises 5% at an annual rate over 6 months, and accelerates to a 5.6% annual rate over 3 months. • Consumer goods show a tendency toward acceleration but do not show a clear unwavering acceleration path. Consumer goods output is up by 1.8% over 12 months; it then recedes, falling at a 4.7% annual rate over 6 months, but it follows that with a surge, growing at a 15.7% annual rate over 3 months. Consumer goods output has a hiccup in between its 12-month and 3-month rates of growth- with that decline over 6 months. • Paradoxically, investment goods are closer to showing ongoing deceleration. Output falls by 5.3% over 12 months, and then falls at a 15.7% annual rate over 6 months. Investment goods trim their loss over 3 months to an 11.4% annual rate of decline, but that's still a decline in double digits. Having double digit declines over 3 months and 6 months definitely is a buzzkill in terms of evaluating trends for Japanese industrial output.

Other Industry: Looking separately at other components of overall industrial production in November, there are increases in mining and in electric and gas utilities output on the order of growth rates of 2 to 2 1/2 percent. In each case, there are reversals of declines in output posted in October. Sequentially, mining output is recovering strongly with output falling 1% over 12 months, rising at a 2.2% annual rate over 6 months, then exploding for a 27.4% annual rate gain over 3 months. Utilities output is more questionable, falling by 0.2% over 12 months, rising over 6 months at only a 0.2% pace, and then falling at a substantial 16.8% annual rate over 3 months. It's hard to understand why electric and gas output falls so strongly over 3 months when other categories of output are all rising solidly or strongly over 3 months; industry clearly needs utilities output to advance. It's very possible that there's some sort of weather effect operating that has retarded the usage of utilities over the last 3 months. It's hard to take utilities out of the context of the report and treat it as something that is authentically weak or worrisome.

Quarter-to-date: In the quarter-to-date, overall output is expanding at a 7.5% annual rate with manufacturing up at 8.2% annual rate. These are data with two-months’ worth of observations in place calculating the two-month average gain over the third quarter base. Sector results for quarter-to-date data show strong gains in consumer goods, as well as intermediate goods and in mining. But there's a significantly strong decline in output in investment goods and an extreme decline in utilities output in the quarter-to-date.
by:Robert Brusca
|in:Economy in Brief