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

Canada| Oct 23 2023
Canadian Consumer Continues a Long Cool Down
Canada’s nominal sales show some overall resilience; however, when adjusted for inflation, sales show deepening weakness in August.

Headline nominal trends are resilient- Canadian retail sales declined in August, falling by 0.1% after rising by 0.4% in July and gaining 0.1% in June. The progression of retail sales growth from 12-months to six-months to three-months shows gains across all horizons with no clear trend. The 12-month growth rate of 1.6% is the same as the annualized 3-month growth rate with a pickup to 3% over six-month horizon in between.

Industry trends show mixed nominal results- Looking at industry level sales, new car dealers show a steady slowdown in nominal sales from 7.2% over 12 months to 2.9% annualized over six months to less than 1% annualized pace over three months. Supermarket sales show a general slowdown with growth rates at 4% or more over six months and 12 months before contracting at a 2.3% annual rate over three months. Clothing store sales gained 5.7% over 12 months and then declined at a rate of 1% or less over six months and three months.

Nominal sales excluding motor vehicles- Taking motor vehicles out of total nominal retail sales leave sales tending towards slightly stronger growth with a gain of only 0.3% over 12 months, rising to 3% over six months and settling back to 2.2% at an annual rate over three months.

Real sales show a clear declining trend- The industry trends for nominal Canadian retail sales are not particularly clear; however, when we take the inflation out of the picture, the overall results clarify themselves. Over 12 months real retail sales rise 1.2%, over six months real retail sales fall at a 0.1% annual rate, and over three months real retail sales fall at a 3.4% annual rate. Moreover, real retail sales fall by 0.6% in August, fall by 0.1% in July, and fall by 0.1% in June. The recent monthly picture is unambiguously weak as monthly reports show that the real retail sales continue to contract.

The real thing... As always, during times when inflation is high and particularly when the inflation rates are changing, it's important to look at the inflation adjusted data instead of just the nominal data. But nominal data can sometimes provide a bit more detail sooner that adds to the flavor of the real signal. Canada's nominal data show unevenness on their own but not real clarity. The real retail sales data show substantial clarity.

Canadian sales quarter-to-date- On a quarter-to-date basis, Canadian retail sales rise by 1.8% in an annual rate with two months data in from the third quarter; excluding motor vehicles, that growth rate rises to 3.4% at an annual rate. However, including motor vehicles but then adjusting for inflation leaves quarter-to-date real retail sales for Canada falling at a 3.6% annual rate with two months of data in hand. In addition, nominal sector sales show that new car dealer sales fall 2% at an annual rate, the quarter-to-date supermarket sales fall by 0.2% at an annual rate, and clothing store sales fall at a 1.2% annual rate.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Oct 20 2023
U.K. Retail Sales Volumes Deflate
U.K. retail sales fell by 0.2% in September. Monthly sales have been erratic, rising by 0.9% in August after falling by 0.8% in July.

Nominal trends- Sequentially retail sales have weakened, rising by 4.7% over 12 months and at a similar 5.1% pace over 6 months then running dead flat over 3 months. Industry sales of food, beverages & tobacco as well as clothing & footwear also have slowed, 12-months to 3-months.

In the quarter-to-date, U.K. retail sales are rising at a 1.2% annual rate. The nominal year-on-year growth rate ranked on data back to 2002 has a 75.1 percentile standing in its historic queue of data.

U.K. sales volumes- U.K. retail sales adjusted for inflation show more weakness as well as contraction in the quarter-to-date. U.K. real retail sales (sales volume) fell in September and in July just as they do for nominal sales. Sequentially retail volumes contract by 0.9% over 12 months, at a -0.8% pace over six months, and at a -6% annual rate over three months. Real retail sales are falling at a 3.1% annual rate in the just completed third quarter. The queue standing for the nominal growth rate is much stronger than the queue standing for the real growth rate; the latter stands at its 18.8 percentile, a far cry from the 75.1 percentile standing for nominal growth. Sales volumes in the U.K. are weak.

Passenger cars- Passenger car sales/registrations have been rising year-on-year for over 14 months. Even so, monthly setbacks have occurred but have been sporadic. Registrations are up at a 20% pace over three months, six months and 12 months despite weakness elsewhere in retail sales.

Survey results for retailing The CBI surveys show sales and orders rebounded in September. While both series are declining in the third quarter, the rankings are mixed. Sales for this time of year have a 77-percentile standing. However, the volume of orders year-over-year has only an 18.8 percentile standing.

Consumer confidence in the U.K. on the GfK measure edged lower in September (it has since fallen harder in October) and it has a September standing at its 31st percentile, a lower-one-third standing in its ordered queue of historic data.
by:Robert Brusca
|in:Economy in Brief
France| Oct 19 2023
France’s INSEE Survey Shows Weaker Manufacturing and Services
The INSEE industry climate gauge as a 29.6 percentile standing and the index fell month-to-month to boot. The index is still below (by 3.6 points) its level of January 2020 before the pandemic struck.

The INSEE manufacturing survey The manufacturing production outlook fell back to -10.3 in October from -6.1 in September, only slightly weaker than the August reading of -9.0. These expectations have been weaker since 2001 about 31% of the time and stronger nearly 70% of the time.

Production has a ‘recent trend’ that has worsened in the month as it fell to a diffusion value of -11.3 in October from -6.4 in September and -4.0 in August. This trend has been weaker historically by less than 10% of the time. Survey respondent also supply expectations for their own firm/industry as a ‘personal likely trend.’ This assessment fell to 4.8 in October from 16.6 in September – but it is higher in comparison to August. The reading for the own-firm trend is at a 29.1% standing, much better than for manufacturing overall but still a lower one-third of ranking value.

Orders and demand remained sub-par in October but improved to -17.3 from -21.5 in September and similar weakness in August. This entry has a percentile standing below its historic median at its 44.1 percentile. Foreign orders and demand have shown more persistent progress, rising to -2.9 in October from -13.0 in September; this series, quite contrarily, has a very strong 81-percentile standing. The French, in some sense, expect to be boosted by foreign economies. That remains to be seen since it is far from clear where this stronger growth is going to occur.

On the price front, the own-price responses are weaker than their August levels while for overall manufacturing prices, the expectation is for net stronger pressures. The own price ranking is at 34.8% with the manufacturing index at a 44.9 percentile.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Oct 18 2023
U.K. Inflation Ticks Higher in September -RELAX
Inflation in the United Kingdom moved higher in September with the month-on-month CPIH headline rising by 0.5% after rising by 0.4% in August and falling by 0.1% in July. The core CPI, which is a measure excluding energy, food, alcohol beverages, and tobacco, rose by 0.4% in September after being flat in August and logging a 0.5% gain in July. The monthly trends of these inflation metrics are not particularly impressive; however, longer trends are more reassuring.

Headline inflation rises by 6.4% over 12 months, at a 4.4% pace over six months and at a 3.4% annual rate over three months. For the core CPI, the 12-month gain is 5.9%, moving higher to 6% over six months and then decelerating to 3.6% at an annual rate over three months. The 5.9% increase in the core-CPIH year-over-year is the same as it was in August. This pair of monthly observations shows the slowest increase in year-over-year inflation since March of this year. Similarly, the headline has become more disciplined even as the year/year pace rose to 6.4% from 6.3% in August. But this is the same as the 6.4% in July and prior to that inflation was running at a pace of greater than 7%, greater than 8%, and greater than 9%! Apart from this recent monthly stretch, inflation was last below 7% in March 2022. Even with the slight backtracking in the headline rate and the flat year/year result in the core, the trends for inflation progress in the U.K. remain in place.

Diffusion that looks at the propensity of inflation to pick up on a period-to-period basis shows mild readings for month-to-month data from July through September. September diffusion is at 54.5%, it was as low as 36.4% in August, and it was at 54.5% in July as well. The neutral reading for inflation is 50%. And the reading of 50% inflation is accelerating in as many categories as is decelerating period-to-period. A reading slightly above 50% indicates a slight tendency for inflation to accelerate across categories. These diffusion results are broadly in the zone of neutrality; in the case of August, there is a clear signal that inflation decelerated broadly.

Applied to the sequential data where we look at three-month inflation compared to six-month inflation, and six-month inflation compared to 12-month inflation, and 12-month inflation compared to a-year-ago inflation, we find diffusion measures at 36.4% over three months, at 45.5% over six months, and at 36.4% over 12 months. All of which indicate that inflation is slowing down period-to-period across categories. This means that inflation across the various CPI categories is behaving and giving the same signals as headline inflation, which is not always the case. In this case, the confluence of inflation trends, assessed in different ways, is reassuring.
by:Robert Brusca
|in:Economy in Brief
Global| Oct 17 2023
Most ZEW Metrics Backtrack in October
The ZEW survey in October is little changed from the views offered in recent months. The macroeconomic assessment for October shows a relatively sharp deterioration in the euro area, a minor monthly deterioration in Germany, and a small amount of progress in the United States, according to the surveyed experts. Averaged three-month, six-month and 12-month data show the euro area largely unchanged in its negative assessment. Germany is assessed as progressively worse while the U.S. progresses to minor improvement in six-months compared to 12-months and in three-months compared to six-months. Assessed based on their queue data standing, the U.S. has the stronger economic situation at a 42-percentile standing, the euro area has a 30-percentile standing, while Germany has a much weaker 13-percentile standing. All of these are below the 50% mark that registers the median value for each individual sovereign area.

Macro-expectations Macroeconomic expectations for the U.S. and Germany find negative expectations in October for both but an improvement in Germany against a deterioration in the United States; both in magnitude of about 10 points (plus for one minus for the other). The averages from 12-months to six-months to three-months show Germany deteriorating to slightly weaker conditions over three and six months. The U.S. gives erratic but consistently negative and slightly more deeply negative readings than in Germany at least based on average diffusion readings. However, the ranking of the October German figure is only slightly higher at 25.8% than the ranking of the U.S. figure at 24.4%. Both reside at or near the bottom 25-percentile in their historic queue of data.

Inflation expectations Inflation expectations fell in the euro area, Germany, and the United States at a time that inflation is excessive in all regions relative to target, indicating that inflation reduction progress is still in gear and progressing more rapidly than it was a month ago. However, on averaged 12-months to 6-months to 3-months data, the metrics all have taken on slightly stronger readings indicating that in the big picture inflation reduction is occurring but that the expected pace of progress may be slowing down.

Monetary policy As for monetary policy, short-term interest rate expectations in the U.S. have gone flat at zero while in the EMU region, there is a sharp reduction in the average diffusion value indicating that some rate hikes are still expected but fewer than before. Both the U.S. and euro area 12-month to 6-month to 3-month averages show steady and large reductions in value, sequentially.

Long-term rate expectations Interestingly, long-term rate expectations turned negative in Germany compared to earlier months while, in the U.S., the reading retained its ongoing negative diffusion value. Recently bond yields have moved higher, contrary to these survey expectations. The progression for averages from 12-months to six-months to three-months shows a steady significant reduction in long-term rate expectations transitioning from positive readings over 12 months to negative readings over three months in both the U.S. and Germany.

Stock market expectations Stock market expectations largely weakened. In the case of Germany, the weakening was slight. The U.S. and the euro area showed sharper reductions in their diffusion indexes that nonetheless remained positive in October. Sequential values show little evidence of changed momentum in any direction.
by:Robert Brusca
|in:Economy in Brief
Europe| Oct 16 2023
Euro Area Trade Surplus Surges Higher through the Backdoor
The European Monetary Union has logged its 4th trade surplus in a row and the 5th surplus in the last six months. This follows a long stretch of deficits that arose in the early post-COVID period.

The surplus: The surplus in August has moved up to €11.9 billion from €3.5 billion in July. The 12-month average is still at a deficit of €7.8 billion. The current account surplus/deficit situation is chronically a balancing act between a manufacturing surplus and the deficit logged on the nonmanufacturing account. In August, the manufacturing trade balance among monetary union members moved up to €34.9 billion from €29.9 billion in July. That compares to a deficit of €23 billion in August versus €26.4 billion in July for the nonmanufacturing trade balance. The larger surplus in manufacturing, of course, causes the overall trade balance to be positive.

Month-to-month: Exports in the monetary union rose by 1.6% in August after falling by 1.7% month-to-month in July; imports fell by 2% in August after rising by 0.1% in July.

Sequential trends: Sequentially export growth in the monetary union is still negative but at more or less steady negative paces running at -3.8% over 12 months, at a -4% pace over six months and at a -3.6% pace over three months. Imports also show consistent and essentially trendless negative growth rates, but they are much weaker growth rates (larger negative growth rates) that coalesced around declines of 20% at an annual rate or a little bit more.

Sequential manufacturing trends: Focusing on manufacturing doesn't change the trends very much. Manufacturing exports over 12 months to six months to three months show all-negative growth rates in a range of -1.8% to -4.0% annualized. Similarly, manufacturing imports show consistent and much larger negative growth rates of -12.8% over 12 months, of -9.7% annualized over six months and of -20.2% at an annual rate over three months. Germany's trade performance is not being achieved on the back of strong exports; rather it's been done on the back of continuing weakness in exports with even weaker conditions in imports.

Sequential nonmanufacturing trends: However, trade performance is a result of manufacturing and nonmanufacturing trends. Nonmanufacturing trends for exports also show consistent negative results for slightly higher negative growth rates in the range between -4.3% and -11.7% over three months, six months and 12 months- again without a clear pattern. For imports, the nonmanufacturing trends show still-gigantic negative numbers, but in this case, they are tending towards slightly less weakness with -41.9% growth over 12 months, -25.3% growth annualized over six months, and -20.9% over 3 months annualized. Comparing nonmanufacturing trends, we basically get the same result as for trade in manufactures. Nonmanufactured exports are weak, but nonmanufactured imports are even weaker and that also tends to drive the trade picture more toward surplus. Clearly, it's demand weakness in the monetary union plus price weakness on the commodity price front that are helping to cause the trade picture to improve in the monetary union.

Germany: The German trade is slightly different from the EMU trend with exports logging positive growth on all these horizons, although showing weakening growth with a 7.6% gain over 12 months, a 1.7% annual rate gain over six months, and only a 0.8% annual rate gain over three months. Compared to the European Monetary Union trends, Germany also has imports weaker than exports, with imports rising 3.8% over 12 months, falling at a 19.4% annual rate over six months and then falling at a 13.1% annual rate over three months.

France: France shows some similarity to the German situation with the growing exports although in the case of France exports are accelerating from 4.3% over 12 months to a pace of 5.3% annualized over six months, to an 11.9% annual rate over three months. French imports are also declining on all these horizons although with a much weaker negative growth rate over three months as French import growth transitions from -9.2% over 12 months to -19.9% annualized over six months to an annual rate of just -2% over three months.

United Kingdom: The U.K. that is completely independent and no longer a part of the European Union shows decaying trends for exports that grow by 24.2% over 12 months, decline at a 14.6% annual rate over six months and then decline at a 54.9% annual rate over three months. U.K. imports fall by 1.2% over 12 months, then fall at a 10.1% annual rate over six months, but then only fall at a 7.1% annual rate over three months. The weakness in exports over three months completely dominate the weakness in imports for the United Kingdom over that period.

Other Selected European exports: Export data for Finland, Portugal, and Belgium show very mixed trends: all of them share declining export trends over 12 months, but then over six months Finland posts an export gain of 1.3% while exports from Belgium and Portugal continue to show substantial negative growth rates over six months. Over three months Finland’s exports declined at a 27.8% annual rate as Portugal and Belgium each saw exports increasing over three months by 7.4% in Portugal and at a 5.3% annualized rate for Belgium.
by:Robert Brusca
|in:Economy in Brief
Europe| Oct 13 2023
IP Gains in EMU in August- Sector Still Challenged
Industrial output in the European Monetary Union rose by 0.6% in August following a sharp 1.3% decline in July and a small 0.1% increase in June. Sequentially output remains weak but without any clear developing pattern. Output is down 5.3% over 12 months; it's falling at a faster 6.7% annual rate over six months; it is falling at a slower 2.6% annual rate over three months. However, in the quarter-to-date with two months of data in-hand, output is falling at a relatively rapid 4.6% annual rate. Turning away from the headline (which is for industrial production excluding construction), manufacturing shows a clearer deterioration in place with a 5% decline over 12 months, a decline at an 11.8% annual rate over six months, and a lesser, but still very rapid, decline of 10.3% at an annual rate over three months.

Sector results find industrial production output mostly increasing in August, with consumer goods output up by 0.7% and capital goods output up by 0.3% offset only by intermediate goods with an output decline of 0.3%.

Sequential sectors Sequential sector results from manufacturing shows consumer goods with output falling 2% year-over-year, falling at a 5.8% annual rate over six months and then rising at a 0.7% annual rate over three months. Intermediate goods output falls at fairly steady 5% pace over 12 months, falling at a nearly identical 5.1% annual rate over six months and falling just a slightly less rapidly 4.4% annual rate over three months. Capital goods has a consistent pace of decline over 12 months, six months and three months, with growth rates clustered near an extremely weak 10% annual rate over each horizon.

Monthly country results Thirteen European Monetary Union countries offer early results for manufacturing industrial production. In August only three countries show month-to-month declines: those are Belgium, France, and the Netherlands. However, in July six countries showed month-to-month declines, while in June ten countries showed month-to-month declines. In June the countries showing increases in industrial production were Italy, the Netherlands, and Ireland.

Sequential growth in IP across EMU members Sequentially these 13 countries show output accelerating in half of them over three months and in half of them over six months, but acceleration occurs in only about 8% of them over 12 months. The accelerations compare three-month growth to six-month growth, six-month growth to 12-month growth, and 12-month growth to the period of 12-months ago. Acceleration data look somewhat better with essentially neutral readings over three months and six months showing that only half of the countries are experiencing output growth that is decelerating. However, in many cases this is because the decline in output – which is still in train- is occurring at a slower pace. Over three months nine countries show output declines; over six months twelve of thirteen-countries show output declines; that is the same number as over 12 months. Output in the monetary union in the manufacturing sector is still broadly declining; however, the pace of decline is not clearly accelerating as over three months and six months we see that accelerations are worse in only half of the members. However, quarter-to-date data show that eleven of thirteen countries are showing output declining with two-month data in for the third quarter.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Oct 12 2023
U.K. Manufacturing Falls in August – Still Solid 12-Month Growth
Industrial production in the United Kingdom fell in August, dropping for the second month in a row. Manufacturing industrial production fell by 0.8% in August after falling by 1.3% in July. However, sequential growth rates over 12 months, six months and three months show expansion on each of those horizons, although without a clear tendency for growth to accelerate or to decelerate. In the quarter-to-date, industrial production is rising at a 0.5% annual rate with two months of data in place. The U.K. economy has generally struggled in the post-COVID period. Which also coincides with a post Brexit. Industrial production and manufacturing are down 3.9% in August 2023 compared with level on January 2020 before COVID struck.

Not only did headline growth rates fall in July and August, but sector growth rates also fell in both July and August. Sector growth rates fell in each one of the major sectors: consumer durables, consumer nondurables, intermediate goods, and capital goods. The largest decline was in consumer durables where output fell 2.5% in August after falling 3.7% in July; capital goods output fell by 1.4% in August after falling by 0.7% in July.

Sequential growth rates show gathering downward momentum for consumer durables where output falls by 4.8% over 12 months, then falls at 6.6% annual rate over six months and then accelerates to a 15.9% annual rate drop over three months. Consumer nondurables output, however, takes the opposite tact, rising by 4.5% over 12 months accelerating to a 5.3% gain over six months, and then accelerating to an 8.1% annual rate over three months. The consumer sector is caught between two completely opposite trends. Intermediate goods output shows some repair underway as output falls by 3.6% over 12 months; that decline is reduced to a -2.2% pace over six months and then output logs a 1.4% increase over three months. For capital goods, there's no trend apparent except that output increases on all three horizons advancing by 7.6% over 12 months and then slowing to a 2.3% annual rate over three months with a slight speed-up in between.

Quarter-to-date sector output trends are not uniform, which is not surprising after looking at the sequential trends. Consumer durables are falling at a 13.1% annual rate while consumer nondurables are expanding at a 6.3% annual rate; intermediate goods output is falling at a 2.9% annual rate while capital goods output is rising at a 1.2% annual rate- all in all, it’s a pretty mixed performance.

The table also produces some industry-specific data. The most interesting thing in the industry data is the weak performance of utilities output in the U.K. This is attributed to a substantial transition to energy saving devices, particularly electricity. The output of electricity, gas and water utilities is lower by 42.6% from January 2020. Overall manufacturing output is down by only 3.9% on this same timeline. This is an incredible difference; much of this owes to to the transition to energy-saving devices, particularly electrical devices. Over the same period, mining & quarrying output is down relatively sharply as well, while the three other listed industries in the table show increases ranging from a 3.9% gain in motor vehicle & trailer output to a 47.2% increase in textiles & leather.
by:Robert Brusca
|in:Economy in Brief
Germany| Oct 11 2023
German Inflation Marks Progress to a Lower (Still Too-Hot) Pace
German inflation was zero in September as measured by the HICP. The core measure of the HICP fell by 0.2% month-to-month. These tallies compare to a headline gain in the German domestic CPI definition of 0.3% month-to-month and a CPI ex-energy that rose by 0.2%, also in September.

Sequential patterns The sequential patterns in German inflation differ for the HICP measure and the German CPI measure. The headline shows a 4.4% gain over 12 months, reduced to 3.4% at an annual rate over six months, then picking up to 3.9% at an annual rate over three months. The headline CPI pattern is not that different, with a 4.5% gain over 12 months, a 2.8% annual rate gain over six months, moving up to a 3.8% annual rate gain over three months. For core inflation, the HICP measure shows a steady deceleration from a gain of 5.4% over 12 months to a pace of 3% over six months, down to 2.3% at an annual rate over three months. The German CPI excluding energy posts a 4.8% gain over 12 months, reduced to a 2.5% annual rate over six months, but then creeping up to a 2.8% annual rate over three months. These two measures of the core inflation show steady deceleration for the HICP, while the domestic CPI excluding energy shows inflation moving to a lower range but not steadily decelerating.

Inflation breadth sequentially Diffusion measures the breadth of inflation. These diffusion metrics are formally constructed as half of the number of categories with unchanged inflation on the period and the full proportion of categories with inflation rising period-to-period. If inflation accelerates in half the categories and decelerates in half, the diffusion reading is 50%; if inflation is unchanged in all categories diffusion is 50%. The 50% mark is construed as inflation-neutral. Diffusion calculated on the domestic categories shows that year-over-year inflation rose more prominently with the diffusion measure of 63.6%; that value emerges by comparing inflation over 12 months with the inflation rate of 12-months ago across categories. Over six months, diffusion drops sharply to 27.3%. This measure compares the six-month inflation rates to the 12-month inflation rates across categories. However, over three months even though the headline and core inflation rates do not tick up by very much on the domestic measure, inflation diffusion comparing three-month inflation rates to six-month inflation rates posts a diffusion metric of 72.7%, indicating inflation accelerating broadly over 70% of the categories.

Inflation breadth monthly The monthly data show a slightly better picture looking at the domestic CPI patterns as the month-to-month changes in inflation in July compared to June post diffusion of only 9.1%; the August to July inflation comparisons show diffusion at 45.5%; the September diffusion measure that compares September inflation across categories to August is only at 27.3%. Inflation on a month-to-month basis looks a lot more calming than the three-month to six-month comparison; the latter shows a sharply higher diffusion metric.

Oil prices spurt However, one of the things to bear in mind is that Brent oil prices have been moving up very sharply over all these periods: over 12 months Brent oil prices measured in euros falls 5.3%; over six months oil price rises at a 37.3% annual rate; over three months oil price rises at a 136.1% annual rate! According to monthly data, the month-to-month gain for Brent oil is 4.1% in July, and moves up to 7.6% in August, and by 10.7% in September. So, the oil prices are moving up and this is going to have an impact particularly on the headline inflation for Germany. The knock-on effects to the core, however, are much less clear cut and there’s a good deal of buffering between the headline and the core impact of Brent oil.

Month-to-month changes in annual/annualized rates For the HICP core, however, the 12-month inflation rate has moved sharply lower to 5.4% from a year-over-year rate of 7% in August, and year-on-years rates of over 7% in June and July as well. The six-month inflation rate breaks lower to 3% in September compared to rates of over 5% in August through May and rates much higher for April and earlier. The three-month inflation rate in September moves to 2.3%, compared to 6.4% in August although it compares to even lower three-month rates in the 3.5% to 5% range from July through May. The HICP headline also broke sharply lower in September with the 12-month pace falling to 4.4% from 6.5% in August. The six-month headline pace fell to 3.4% in September from 4.2% in August while the three-month pace fell to 3.9% in September from 6.9% in August. The September 3-month headline pace is still higher than the three-month pace in May, June, and July.
by:Robert Brusca
|in:Economy in Brief
Germany| Oct 06 2023
German Orders Jump…But from a Pothole
The year-over-year chart of German order growth rates puts in context some of the wild changes in growth rates we've seen month-to-month over the past three months or so. But the chart makes clear that the year-over-year trends haven't changed very much although there's been a great deal of monthly turbulence recently. In June, orders jumped 7.6%. In July, they fell by 11.3%. In August, they rose by 3.9%. On balance, over this period there hasn't been much change in orders, but the monthly turbulence has been tooth-rattling.

Sequential growth rates aren’t particularly telling either, with 12-month growth at -4.4%, the six-month annualized growth rate at -11.3%, and the three-month growth rate stands at -3.1%. All these statistics show that over all the periods orders are declining, but there's no clear trend beyond that. Foreign growth shows some wild swings from -5.1% over 12 months, to -12.5% over six months, then jumping to +6.7% over three months (all annualized). Domestically there is deterioration as the 12-month growth rate of -3.2% gives way to a -9.3% pace over six months which then gives way to -15.4% pace over three months. The domestic picture is worth keeping an eye on.

Sector sales, adjusted for inflation, generally show declining trends and a tendency toward progressive deterioration apart from consumer durables and intermediate goods. For all the manufacturing, sales rise by 0.8% over 12 months, fall 1.9% over six months and then the drop accelerates to -7.2% over 3 months, a clear deteriorating pattern. So while the order patterns are indeterminate except for domestic growth, demand conditions are clearly worsening - the trend for demand shows the clear deterioration.

Industrial confidence for selected large European economies shows negative numbers and a worsening for the recent months apart from Spain and, even that is a minor exception. The averages for industrial confidence measures over 12 months, six months and three months are negative and show deterioration on those timelines.

Quarter-to-date trends are broadly negative with two months of quarterly data now available. For the European industrial data, the table presents instead of quarterly changes the queue percentile standings and here the standings are in the lower 30th percentile for three of the four countries with Spain logging a stronger 41-percentile standing.
by:Robert Brusca
|in:Economy in Brief
France| Oct 05 2023
French IP Extends Its Weak Streak; Output Declines in August
French manufacturing production fell by 0.4% in August, reversing a 0.4% increase in July after falling by 0.9% in June. Manufacturing in France shows a steady string of declines falling by 1.1% over 12 months, falls at a 0.7% annual rate over six months and accelerates that decline to a 9.7% annual rate drop over three months.

Sector trends- The output of consumer goods, however, shows mixed trends. Durable goods output moves in the other direction with consumer durables output up by 4% over 12 months, up at a 13.8% annual rate over six months and rising at a 16.8% annual rate over three months – a clear, strong, accelerating path. On the other hand, however, consumer nondurables output continues the weak streak that we see in the headline, falling by 2.7% over 12 months, falling at a 4.4% annual rate over six months, and falling at a 2.4% annual rate over three months. Capital goods output is declining in August on a month-to-month basis. But it rises by 3.8% over 12 months, accelerates to a 4.2% annual rate over six months, then drops back to gain at only a 2.5% annual rate over three months. Clearly, the sector that's driving negative industrial output overall is intermediate goods where output logs a 5.9% decline over 12 months, a decline at a 4% annual rate over six months and a decline at a 12.8% annual rate over three months.

The quarter-to-date- Data are up to date through August, so the quarter-to-date calculations are for two months into the third quarter. On that basis, output is falling at a 0.1% annual rate, consumer durable goods output is falling at a 1.3% annual rate in the quarter, consumer nondurable goods output is rising at a 1.2% annual rate, capital goods output is rising at a 3.8% annual rate, and intermediate goods production is falling at a 6.4% annual rate. Output trends in the quarter clearly have mixed characteristics; in fact, in the quarter-to-date numbers seem quite different than the trends that we see sequentially over 12-months to six-months to three-months.

Auto registrations- The registration (and, presumably, the purchase) of automobiles fell by 2.5% in August after rising 3.2% in July and falling by 2% in June. Sequentially registrations are mostly weak, falling by 2.8% over 12 months, rising at a 7.4% annual rate over six months, and then falling at a 5.3% annual rate over three months. However, this pattern compared to the second quarter base still generates a 15.1% annual rate gain in the quarter-to-date with two months of data into the third quarter.
by:Robert Brusca
|in:Economy in Brief
Global| Oct 04 2023
OECD LEIs Mostly Creep Higher in September
The OECD 7 and U.S. LEIs each gained 0.1% in September. Europe’s Big 4 and Japan were both flat. Asia’s Major 5 gained 0.1% in September. Progressive annualized growth rates calculated for these countries/regions from the normalized indicators show gathering strength for the OECD 7, Japan, and the United States. Asia’s Major 5 are on the cusp of progressive acceleration and should probably not be excluded on a technicality because their 3-month and 6-month growth rates are so much stronger than other regions even if the 3-month pace is a tick slower than the 6-month pace. And, only Japan and Asia’s Major 5 have queue standings of their LEI levels (top panel) that are above their historic medians (above a rank of 50%). The OECD 7, Europe’s Big 4 and the U.S. all are in or at the border of their bottom third rankings on the amplitude-adjusted level assessment.

Gaining traction... Recalibrating the ranking for growth rates of LEI measures, rather than ranking on levels, shows a 91.4 percentile rank standing for China, a 74.7 percentile ranking for the U.S., a 68.2 percentile standing for OECD 7, and a 64.7 percentile standing for Japan. Only Europe’s Big-4 grouping is below its median value. These are ranked on six-month growth for data back to mid-1999. All the six-month averages are gaining and the changes over six months on LEI levels also show gains across the board. The OECD prefers to assess its LEIs over six-month periods. On that basis, the LEIs are broadly GAINING TRACTION.

Amplitude adjusted assessments- The third panel of the table shows ratios to trend for the LEIs on an amplitude-adjusted basis. Only the U.K., Japan, and China are consistently above 100 indicating above normal expansion. The LEI level standing shows above median performance for the U.K., Japan, Germany, France, and China.
by:Robert Brusca
|in:Economy in Brief