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

Japan| May 31 2023
Japan’s Industrial Output Is Flat in April But Carries Momentum
Japan’s industrial output was flat in April after rising by 0.2% in March and by 4.5% in February. Manufacturing output fell by 0.2% in April after rising 0.8% in March and gaining 4.9% in February. Despite the flat or declining output in April for industry overall and manufacturing, Japan carries momentum from strong gains in February and further gains in March after stumbling in a deep hole in January. As a result of this output pattern, these weak-seeming monthly numbers are setting output up for a strong gain in the second quarter relative to what was a disappointing first quarter in Japan. Overall output is growing at an annual rate of 10% in the second quarter as manufacturing output is growing at a 12.1% annual rate. These early returns for the second quarter occur with only one month's worth of data in hand.

Sequential growth rates show total industry output growing 0.2% over 12 months, advancing at a 0.6% annual rate over six months and exploding at a 20.2% annual rate over three months. Manufacturing output is up by 0.6% over 12 months, growing at a slightly faster 0.8% pace over six months and then bursting out at a 23.9% annual rate over three months.

IP manufacturing sectors Sector growth rates show acceleration in progress for consumer goods. Their 7.4% growth over 12 months is substantially preserved over six months and then mushrooms to a 24.1% annual rate over three months. Intermediate goods output falls by 3.3% over 12 months, improves to a decline at just a 0.9% pace over six months and then surges higher to a 25.8% annual rate over three months. Investment goods have a more complicated pattern, with output rising by 1.6% over 12 months, then giving ground to fall at an 11.4% annual rate over six months but recovering to surge at a 26% annual rate over three months.

On monthly data, the manufacturing sectors show three output gains in a row for consumer goods, and gains in April and February with a decline in March for intermediate goods, while investment goods display three monthly increases over February, March, and April. On balance, the second quarter looks like it's on its way to delivering strong growth in Japan. The quarter-to-date growth rates for consumer goods, intermediate goods, and investment goods lie in a range of 15% to 20% at an annual rate. These are quite strong growth rates for output.

Other industry Mining is a different story, showing output declines in February, March and April although the output declines diminish in April. Mining shows an 8.9% output drop over 12 months that worsens to a 17.6% annual rate decline over six months and worsens further to a 22.4% annual rate decline over three months. The mining sector in the Japanese economy is weak by months as well as sequentially weak and is still weakening over the past year.

Utilities for electricity & gas show declines in February and March month-to-month but bounce back as output increases by 1.4% in April. Sequentially utilities are showing a weakening trend with a 5.7% decline over 12 months, a 6.9% annual rate decline over six months and a 19.8% annual rate decline over three months. It's a bit of a surprise that electricity & gas usage can sequentially decline while manufacturing, for the most part, is accelerating.

Both mining and electricity & gas show output declines in progress in the second quarter with mining showing a 21.4% annual rate decline early in the quarter and electricity & gas showing a 14.3% annual rate decline early in the quarter.

Despite what looks to be good momentum over the last 12 months, Japanese output has not generally been impressive. Total industry output is still 2.5% lower than it was in January 2020 before COVID struck most of the global economy. Manufacturing output is lower by 3.4%, consumer goods output is lower by 2.5%, intermediate goods output is lower by 5.6%. Only investment goods show output stronger in April 2023 than it was in January 2020 with a gain of 2.4% over that three-year period. Mining and utilities both show weak output with mining weaker by 16% than it was in January 2020; utilities output is weaker by just 1.9%.
by:Robert Brusca
|in:Economy in Brief
Global| May 30 2023
Clear Monetary Deceleration in Global Money Centers
The growth in nominal money supply is declining globally in the major money center areas. Japan shows the most resistance to deceleration while the U.S. is the strongest example of monetary deceleration.

United States: U.S. money supply growth has not only decelerated but it's contracting in nominal terms as it is declining at an accelerating rate. U.S. money supply falls by 4.6% over 12 months, its annualized growth rate is -7% over six months, the annualized growth rate over three months is -9.8%.

EMU: The European Monetary Union (EMU) also shows declining money supply growth and contracting money supply. Over 12 months money supply in the monetary union is still increasing by 1.3%, but over six months it's declining at a 2.8% annual rate and over three months it's declining at a 3.5% annual rate.

United Kingdom: The U.K. shows a somewhat more erratic deceleration in money supply with growth up by 0.5% over 12 months following at a -0.3% annual rate over six months and rising at a 1.1% annual rate over three months. The U.K. money growth rates are still substantially decelerated from what we saw over 2-years when money grew at a 3.2% annual rate and 3-years when it grew to 6.3% annual rate. Also, U.K. money stock data are one month behind the other countries because of data availability - that could explain some of their differences in pattern.

Japan: Money supply in Japan continues to grow and shows a very slight acceleration from 12-months, to 6-months, to 3-months with the growth rates progressing at annual rates from 2.5% over 12 months to 2.6% over six months to 3.2% over three months- they are tightly clustered more than trending. These rates compare to growth over two years of 3% and three years of 5%. Generally, growth in money has slowed in Japan but it is not as clearly slowing over this recent period as it is in the other monetary centers.

Real money balances erode Adjusting money supply for inflation puts just about all the money growth rates across all the countries in negative territory. In the EMU, negative growth rates extend back over two years. In the USA, negative real growth rates extend back over two years as well. In the U.K., negative real money growth rates extend back over two years. In Japan, over two years money growth is flat; falls by 0.9% over 12 months and then falls at a less-weak 0.4% annual rate over six months, and Japan manages to break with the rest of the group posting growth in real money balances at a 2% annual rate over three months.

Weak credit in EMU In addition to the weak money growth, the European Monetary Union is showing weak growth in private credit as well as in credit to residents. Both credit aggregates credit show declines in nominal credit extension over three months and over six months. Deflating the statistics for inflation, finds that real credit growth is falling over at least the last three years on both measures... and the pace of decline is accelerating.

Money and credit trends These sorts of trends in money and credit growth have economists thinking that inflation has peaked and that it's due to come down in the period ahead because money grows it's so weak and of course it's weak broadly across most of the major money center countries. However, it's also true that money supply is simply weakening after it had experienced booms in all these countries. In some sense, money growth is still only returning itself to a more sustainable long-term path and that's what makes money growth more difficult to interpret.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| May 25 2023
U.K. Distributive Trades Survey Weakens
Retailing In retailing, sales in May for the distributive trades survey compared to a year ago show that the May reading dropped to -10 from +5 in April and from a positive reading in March. Orders compared to a year ago fell to a - 30 reading in May from a +1 in April. Sales adjusted for the time of year fell to a -18 reading from +21 in April. The stock-sales ratio rose to a +25 in May after a -2 in April, indicating potentially that inventories are beginning to build while sales are weakening.

The queue percentile standings for these readings show that orders compared to a year ago are extremely weak with the 8.8% standing. Sales compared to a year ago have a 20-percentile standing; sales compared to the time of year have a 23.9% standing. The stock-sales ratio has nearly an 89-percentile standing, potentially an indication of a building stock-sales imbalance.

The readings for expectations in retailing show that the June expectations for sales compared to a year ago are flat, an improvement from -7 logged for May. Expected sales adjusted for the time of year have been running hot and cold month-by-month. Orders compared to a year-ago are decisively weaker than the -25 reading in June when compared to -8 in May; they are even slightly weaker than the March reading of -23. Expected sales for the time of year at a -9 reading compares to a +16 reading for the month of May. The -9 reading breaks a string of positive numbers. The stock-sales ratio moves up to +14 in June from +5 in May.

The queue percentile standings for expectations essentially mirror the readings that we see for sales in the current period. Orders compared to a year ago have a 7.4 percentile standing. Sales compared to a year ago are at a 27-percentile standing. Sales evaluated for the time of year log a 29.5 percentile standing. The stock-sales ratio expected for June has a 64.6 percentile standing.

Wholesaling Wholesaling readings roughly mirror the retailing with slightly firmer percentile standings. Sales in May compared to a year ago slipped to a -5 reading from +13 in April. Orders compared to a year ago fall to -8 from -2 in April. Sales for the time of year have a +8 reading compared to plus 15 in April. The stock-sales ratio moves up to +31 from plus 18 in April.

The queue rankings show percentile standings for wholesale sales a year ago at a 23.6 percentile mark. Orders compared to a year ago have a 31-percentile standing, much stronger than their counterpart reading for retailing. Sales for the time of year have a 41.2 percentile standing, also stronger than its counterpart reading for retailing. The stock-sales ratio has a 90.5 percentile standing, close to the queue standing for retailing.

Expected wholesale sales in June compared to a year ago show a -3 net reading compared to a +9 in May. Orders, compared to a year ago, have a -6 reading, a worsening from -1 in May but an improvement from April and March. Wholesale sales for the time of year slipped to -6 in June from +14 in May. The stock-sales ratio edged lower to a net reading of +17 in June from +20 in May.

The percentile standings for expected wholesale sales in June show a 27-percentile standing for sales compared to a year ago. Orders compared to a year ago have a 32-percentile standing; that's much stronger than the counterpart reading in retailing for expectations. Sales for the time of year have a 44.9 percentile standing, also considerably stronger than the retail counterpart for expectations. However, the stock-sales ratio, with a 67.7 percentile-standing, is close to the ranking for expected sales in retailing.
by:Robert Brusca
|in:Economy in Brief
Germany| May 24 2023
German IFO Survey Backtracks in May; First Deterioration in Seven Months
First back-track in seven months Germany's IFO survey made its first back-tracking in seven months in May. The all-sector climate index stepped back to a net reading of -7.5 in May from -0.6 in April. Current conditions edged to a slightly lower all-sector index reading, dropping to +16 from +16.6 in April. Expectations made a larger drop falling to -14.2 in May from -7.7 in April for the all-sector index.

Rankings The ranking assessments of these headlines are low; the all-sector climate index is at a 16.4 percentile rank, the current conditions index is at a 26.9 percentile rank, and the expectations index at a 10.5 percentile rank. All these standings are substantially below their respective medians which occur at rankings at 50%.

Climate by sector The climate ratings in May show negative values across the board except for the service sector with a +6.8 reading, edging slightly lower from +6.9 in April. Manufacturing that had a +6.3 rating in April had fallen to a -0.3 climate reading in May. Among the sector rankings, the weakest ranking is for wholesaling at a 7.8-percentile rank while the strongest ranking is for construction with a 25.1 percentile rank, followed by manufacturing at a 23.7 percentile rank.

Current conditions by sector Current conditions show more positive diffusion readings for May with the all-sector reading at a positive 16, manufacturing at a positive 14.1, and services at a positive 24.3. But for the all-sector headline and the sectors, there was only one improvement, that was in the service sector which improved to the diffusion reading of 24.3 in May from 22.1 in April. Manufacturing backtracked to 14.1 in May from 15.4 in April while construction, wholesaling and retailing all dropped from positive readings to net negative readings in May. The rankings for the current indexes show more strength than for climate, with construction coming close to its median at a 47.5 percentile standing, followed by retailing at a 40.6 percentile standing. However, wholesaling again is the weakest with a 16.4 percentile ranking in May.

Expectations by sector Expectations show negative readings across the board and deterioration month-to-month with one exception, construction. Construction improved ever so slightly to a -32.4 reading in May from -32.5 reading in April. For the rest of the sectors, there is month-to-month deterioration from April to May with a drop of more than ten points for manufacturing comprising the biggest month-to-month drop of all. The standings show several very weak sectors. Wholesaling is at a 5.9 percentile standing and construction at a 7.3 percentile standing. The strongest percentile standing is in manufacturing at a 16.4 percentile standing followed by retailing at a 13.7 percentile standing. Obviously, compared to climate and current conditions, the standings for expectations show much weaker conditions across the board.
by:Robert Brusca
|in:Economy in Brief
Europe| May 23 2023
Manufacturing-Services PMI Gap Grows in EMU
Global PMI data were mixed in May with more reports of weakening data than of strengthening data. Japan is the clear exception in May with strengthening posted for its composite, for manufacturing, and for services. Japan is on a string of consecutive increases in all three measures and is the only country in the table like that. The United States comes close with stronger month-to-month changes in all the PMI metrics except for manufacturing in the current month of May.

The EMU manufacturing is consistently weakening month-by-month with France an exception in May showing some strengthening. Germany deteriorates and manufacturing in the EMU measure deteriorates.

The United Kingdom shows mixed trends although in May it shows a strengthening in all three measures.

Composite PMIs In terms of the ranking or standing of the sectors, the strongest standings ranked on observations since January 2019 show that Japan ranks best with its composite in May standing on its high for this full period. With a high-low ranking of 100%, Japan has a queue ranking of 98.1%. The queue ranking tells us that it has been this high or higher only about 2% of the time. The next strongest composite reading is from Germany with a 71.7 percentile standing, followed by the U.K. with the 69.8 percentile standing. The U.S. has a 58.5 percentile standing. France has a standing at its 45.3 percentile mark, below its historic median for this period.

Manufacturing PMIs Manufacturing sectors are weak across the board with most of them having a bottom 15% or lower standings in their queue of data ranked from January 2019. The exception here is Japan with a manufacturing sector having a 62.3 percentile standing.

Service sector PMIs Service sectors tend to have firm to strong readings with Japan’s service-sector having a 98.1 percentile standing. Germany’s has a 90.6 percentile standing. The European Monetary Union logs an 83-percentile standing. The United Kingdom posts a 73.6 percentile standing. In the U.S. a 64.2 percentile standing is in place while France has a 56.6 percentile standing.
by:Robert Brusca
|in:Economy in Brief
Belgium| May 22 2023
Belgian Consumer Confidence Sinks
The upshot for the Belgian survey is that most conditions are considered to be a subpar (below a 50% standing), however, there's rather striking and surprising optimism on inflation even though Belgium is a country in the European Monetary Union and inflation in the union is high as the ECB has been slow to raise rates and still has work to do with interest rates well below the current inflation rate. Belgians don't seem to be too concerned about those factors. There is concern about the economic situation. The current assessment is that it is below par as unemployment concerns are beginning to creep higher. The survey overall is comparatively down beat with the exception of the inflation light expectation response.
by:Robert Brusca
|in:Economy in Brief
Japan| May 19 2023
Japan’s CPI Rises by 0.6% as the Year-on-Year Rise Ascends to 3.4%
Japan’s year-over-year CPI accelerated to 3.4% in April from 3.2% in March on a monthly gain of 0.6%. Even with that, Japan's CPI is decelerating as its 12-month gain of 3.4% diminishes to a 2.3% annual rate over 6-months and diminishes again to a 1.2% annual rate over 3-months. The year-on-year headline is getting all the attention in this report, but the sequential decline is worth paying attention to- but how much?
by:Robert Brusca
|in:Economy in Brief
Japan| May 18 2023
Japan's Trade Flow Momentum Shrinks...but so Does Its Deficit
The speed of export and import growth for Japan has steadily slowed with the exception of a pickup in export growth over the last three months. These trends have accompanied an improvement in Japan's trade deficit from 12-months to 6-months to 3-months.

In April Japan's exports rose 2.5% after falling 0.7% in March and rising 3.6% in February. Imports rose by only 0.1% in April after falling in step with exports in March, by -0.7%, but also fell by 3% month-to-month in February. Over this stretch exports have clearly outpaced imports.
by:Robert Brusca
|in:Economy in Brief
Japan| May 17 2023
Japan's GDP Beats Expectations Even as Net Exports Are Weak
Japan's first quarter GDP beat expectations, rising 1.6% at an annual rate when a gain of less than one-half of 1% had been expected. However, the gain in the fourth quarter was revised to a slight decline taking some of the surprise value away from the first quarter reading.

The annualized quarterly gain of 1.6% was the strongest growth since the second quarter of 2022 when GDP rose 4.7%. That second quarter growth rate is flanked by declines in the third quarter and in the first quarter just before it.
by:Robert Brusca
|in:Economy in Brief
Global| May 16 2023
Zew Macroeconomic Expectations Turn Lower
Economic expectations in Germany turned lower in May, with an up-minus-down net diffusion reading falling to -10.7 from +4.1 in April. The reading for the United States weakened as well to a reading of -29.6 in May from -23.3 in April. The deterioration in expectations comes, as inflation continues to linger high with central banks raising rates.

Current economic conditions are mixed in May. For the Euro-Area there was an improvement to -27.5 in May from -30.2 in April. Germany, however, shows deterioration to -34.8 from -32.5 in April. The US also shows deterioration, as its net reading swings from a + 4.1 net in April to a -3.4 diffusion marker in May.
by:Robert Brusca
|in:Economy in Brief
Europe| May 15 2023
EMU IP Falls Sharply in March
Industrial production in New York in monetary union fell by 4.1% in March after increasing in January and in February. Manufacturing output fell by 5.9% after two months of increases. During this three-month stretch the monitoring and manufacturing purchasing managers index weakened in each of the three months.

Sequential trends Looking at broader sequential changes, industrial production in the European Monetary Union fell by 2.1% over 12-months, fell at a 7.9% annual rate over 6-months, and fell at an 8.3% annual rate over 3-months. For manufacturing, output falls 1.7% over 12-months, at a 10.4% annual rate over 6-months, and at a 14.4% annual rate over 3-months. Both the overall and manufacturing definitions of industrial output in the monetary union are declining; output declining on all three horizons and it's declining at an accelerating pace both overall and in manufacturing.

By sector in March The results in March show an increase in output for consumer durables, a decline in output for consumer nondurables, a decline for intermediate goods output and a very sharp decline of 15.4% for capital goods output. For consumer goods output overall there is a decline of 0.9%. in March

Sectors sequentially Viewed sequentially, consumer goods output is decelerating, dropping from a 5.9% rise over 12-months, to a 0.8% annual rate decline over 6-months, to a 3% annual rate decline over 3-months. Intermediate goods show some spunk after declining by 4.9% over 12-months and accelerating that decline to a 5.8% annual rate over 6-months, intermediate goods output rises at a 2.9% annual rate over 3-months. Capital goods show a disastrous profile with output falling by 5.7% over 12-months falling at a 24.6% annual rate over 6-months and then imploding at a -44.3% annual rate over 3-months.

QTD (A completed first quarter) Quarter-to-date tracking for March gives us a completed profile for the first quarter. Total output is falling at a 0.6% annual rate in the quarter; manufacturing output is falling at a 2.9% annual rate. Consumer goods overall shows output falling at a 4.6% annual rate, intermediate goods output falls at a 0.9% annual rate, and capital goods output falls at a 14.1% annual rate. Intermediate and capital goods output both are below the levels of output that had prevailed in January 2020 before the COVID emergency struck.

Country details For the European Monetary Union, nine of the thirteen countries listed in the table log declines in March. Three other countries report output early, the UK, Sweden, and Norway: two of them, mark month-to-month declines in March with the UK being the exception posting an increase. This is a sharp turnaround from February when only three EMU countries showed declines and with the three other European countries showing output increases. In January nine EMU countries showed output declines while the three other European countries showed output increases. This has generally been a period of declining output in terms of breadth and in terms of overall weighted European output. The median for European Monetary Union countries shows an output decline in March as well, in January, with an increase in the median logged in between in February.

Sequentially six monetary union members show output declines over 3-months, seven of them show declines over 6-months and seven of them show declines over 12-months – a consistent proportion hovering around half of them.

Among European Monetary Union members 54% show growth rate improvement over 3-months, nearly 54% show growth improvement over 6-months as well, and 45% show growth rate improvement over 12-months. Quite apart from whether the underlying growth is negative or positive, there is some improvement in train for growth rates moving from 12-months to 6-months to 3-months for Monetary Union Members. Even so, these calculations are not adjusted for size, and we can see that overall the Monetary Union is still experiencing substantial output declines.

EMU-summing up The bottom line for the EMU is that the sectors are showing a great deal of weakness with a particularly intense weakness in the capital goods sector, which is not unusual with economic weakness encroaching. Firms worried about recession may have decided that it's not the best time to engage in capital expansion. In March the breadth of weakness is quite widespread although the breadth of weakness has not substantially encroached on growth rates measured from 12-months to 6-months, to 3-months - at least not on a broad basis across members. Although overall those growth rates (output-weighted in the EMU total) do sequentially deteriorate. Industrial output in the first quarter is weak, showing declines for the European Monetary Union as a whole and showing declines in 6 of the 13 reporting members in the table. Inflation continues to run quite hot in the Monetary Union. The ECB continues to raise rates and the outlook continues to be impeded by the ongoing war between Ukraine and Russia.
by:Robert Brusca
|in:Economy in Brief
France| May 12 2023
French Inflation Is Unrelenting
French inflation continues to be unrelenting and hot. The HICP measure of inflation rose by 0.6% in April. France’s domestic CPI measure rose by 0.6%, but its gain excluding energy is 0.5% in April. These continue to be very hot monthly readings.

France’s HICP inflation rate is high and it's accelerating. Over 12 months the pace is 6.9%, over 6 months it holds at 6.9%, and over 3 months it jumps up to an 8.4% annual rate.

France’s domestic CPI rises by 6% over 12 months, it steps up to a 6.3% pace over 6 months and runs at an annual rate of 7.9% over 3 months. The domestic CPI excluding energy gains 5.8% over 12 months, runs at a 6.1% annual rate over 6 months and jumps up to an 8.4% annual rate over 3 months. French inflation is not just high and stuck; it's high and accelerating.

France is not showing any sign of inflation progress even though the ECB continues to hike rates. And the whole of the European Monetary Union headline inflation has peaked and fallen off, but France is not following this pattern; France is now more or less the same pattern as the United Kingdom where inflation has gone up and refuses to come down. France’s ex-energy inflation rate continues to accelerate.

Inflation in April may have gotten some boost from oil prices where Brent measured in euros rose 6.4%. But that's after two months of declining oil prices. In fact, Brent oil prices are lower over three months, 6 months, and 12 months although the rate of change over those horizons is sequentially diminishing.

Besides being hot and accelerating, French inflation also remains quite broad. The diffusion calculation shows that over three months inflation is accelerating across 72.7% of the major categories compared to its pace of six-months ago. Over 6 months, it's accelerating in 63.6% of the categories compared to its pace over 12 months. Over 12 months the diffusion gauge drops below 50% indicating that inflation is not accelerating in most categories compared to the pace of 12-months previously; the 12-month diffusion metric is at 45.5% just below the neutral 50% mark
by:Robert Brusca
|in:Economy in Brief