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

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
Japan| May 11 2023
Japan’s Economy Watchers Index Rises; Expectations Improve
Japan's economy watchers index improved in April to 54.6 from 53.3 in March. March had improved to 53.3 from 52.0. The index has been increasing steadily over 12 months. It is higher by 5.1 points over 12 months, by 3.8 points over 6 months and by 6.1 points over 3 months. A lot of improvement has come in the last few months.

In April, all the diffusion readings in the economy watchers current index are above 50, indicating expansion for the category, with two exceptions: housing and manufacturers. Housing has a 46.1 diffusion reading and has been below 50 for several months running. The manufacturing index has been vacillating, but the April value of 49.6 shows only a very slight contraction in progress in manufacturing.

To evaluate these diffusion indexes by seeing where they stand relative to historic data, refer to the queue standing column at the far-right hand portion of the table. Among the ten entries under the current index, six have queue percentile standing in the top 10% of values since April 2002. All readings stand above the 50th percentile signaling that all are above their historic medians for this period. Among the headline and the nine components, the headline and seven components show increases on all horizons: over 12 months, over 6 months and over 3 months.

The future readings for the economy watchers index also show steady increases with the 55.7 diffusion index in April, better than its 54.1 diffusion reading in March which exceeds the 50.8 reading for February. The future headline also shows gains over all three horizons: over 3 months, over 6 months and over 12 months. Like the current index, all the percentile queue standings for the future index are above the 50th percentile mark - all categories are above their historic medians. In addition, the headline and six components have standings in their top ten percentile.

The raw diffusion readings for April in the future index show only housing below 50 in its diffusion value. And like with the current index, housing has a string of sub-50 diffusion readings. However, its queue standing remains above its 50th percentile on data back to 2002.

Not only is the current assessment quite upbeat but so is the outlook assessment from the future index.
by:Robert Brusca
|in:Economy in Brief
Europe| May 10 2023
Industrial Output in EMU/Europe Remains Distressed
Industrial output in Europe continues to be challenged in March. The median percentage change for the early reporting European Monetary Union members shows a drop of 1.1% following a gain of 1% in February and a drop of 1.7% in January. There are still net declines over three months, over six months, and over 12 months for the median, based on the grouping of countries in the table.

Of the 14 European economies listed in the table, 11 of them show month-to-month declines in industrial production in March. That is very substantial breadth. The countries showing increases in March are Luxembourg, Spain, and Finland. Among the rest of the countries, industrial production declines show small drops only in Norway and Italy where IP sheds just of 0.4% month-to-month; all the rest of the declines are month-to-month declines of one full percentage point or more (nine in all).

The median calculation shows a steady pace of decline over three months, six months, and 12 months at annual rates. The decline over 12 months is 1.2%; the decline over three and six months, in both cases, is at -1.3%. Over three months, six of the 12 European monetary union economies are showing declines in industrial production; eight of them show declines over six months and seven show declines over 12 months. The breadth underlines that output trends remain consistent across each of these spans.

For the quarter-to-date, which is for the first quarter, since March data complete the quarterly results, a decline in the median of -0.4% is indicated. There are declines in six of the reporting European Monetary Union economies in the first quarter (QTD).

The manufacturing PMI for the entire European Monetary Union shows month-to-month declines in March and February although it shows a net rise over three months juxtaposed against net declines over six months and 12 months.
by:Robert Brusca
|in:Economy in Brief
France| May 09 2023
French Trade Deficit Shrinks
The French trade deficit contracted to 9.95bln euros in March from 11.37bln euros in February.

French exports show more resilience than imports, but they have a complicated trend in play. Exports rise by 9.5% over 12 months, fall at a 6.5% annual rate over 6 months and edge up at a 0.7% annual rate over 3 months. This semi-weakening profile is still considerably stronger than for imports.

Import trends are simply decelerating progressively. Imports fall by 2.4% over 12 months. They fall at a faster, 29.4% annual rate over 6 months, and then they fall at an even faster 36.7% annualized rate over 3 months. The import picture in France is much more worrisome than for exports, but there also are special issues there.

As for components, exports show a consistent but not uniform pattern of the various flows advancing over 12 months, contracting over 6 months then rebounding over 3 months. The ‘other’ category is the exception to this set of trends.

Imports show a consistent withering trend overall that is echoed by two of the three components as ‘food’ and the ‘other’ categories show steady deceleration. Transportation equipment imports decelerate sharply from 12-months to 6-months then reduce their rate of contraction over 3 months. The sector is still weakening but not at progressively faster rates of change.
by:Robert Brusca
|in:Economy in Brief
Germany| May 08 2023
German IP Drops Sharply in March; Trend Is Unclear and Muddied by Component Trends As Well
German industrial production fell by 3.4% in March driven lower largely by a 4.4% decline in capital goods along with a 3.5% decline in the output of intermediate goods. Consumer goods output backtracked by 0.1% in March.

Sequential growth paths The sequential growth rates for output in Germany paint a mixed picture with 12-month growth at 1.6%, 6-month performance showing a decline of 0.4%, at an annual rate, and 3-month growth surging at a 9.5% annual rate, despite the sharp drop in March. The 3-month period is largely bolstered by substantial increases in January and February when output rose by 3.7% in January and 2.1% in February. As a result, the March drop is a partial backtracking from that strength.

Sector trends in German output However, the components of German industrial production do not paint a particularly strong picture with a good deal of weakness portrayed over 6 months and 12 months, largely offset by some strength over 3 months; the exception is capital goods that reverses those patterns. Capital goods output is strong over 12 months and 6 months then falls at a 4.8% annual rate over 3 months. Intermediate goods have the opposite pattern, with output falling over 6 months and 12 months then rising at a 21.2% annual rate over 3 months. Consumer goods output declines over 6 months and 12 months, then makes a marginal increase at a 1.6% annual rate over 3 months. As a result of these scattered trends, the true trend for production overall in Germany is simply too turbulent to nail down.

Construction gains momentum In the construction sector, output fell by 3.1% in March after sharp gains in February and January. Construction does show acceleration and progress with 12-month rate at -2.7%, 6-month growth at 4.3% annualized, and 3-month growth at a stunning 39.8% annual rate.

Real sales and order trends Real manufacturing orders, however, show sequential weakness with a sharp drop of 10.7 March and with 12-month growth at -11%, 6-month growth at -13.2% annualized, and 3-month growth at -22.5% annualized. Real manufacturers’ sales also are challenged. Real sales in manufacturing point lower with growth of 3.8% over 12 months, a 3.7% annual rate decline over 6 months, and a sharper 8% annual rate drop over 3 months. Real sales in manufacturing also fell in March by 2.9%.

Other industrial indicators Other industrial indicators for Germany also create a mixed picture.

ZEW: The index from ZEW remains negative and it weakened in March compared to February. Its sequential readings show deterioration. The 6-month average deteriorates from the 12-month average, but then an improvement occurs over three months compared to six months.

IFO: The IFO manufacturing index shows some tendency to increase with the 6-month and 12-month readings nearly identical and some improvement over 3 months; the monthly sequence from January to February to March, strengthens steadily. The IFO manufacturing expectations reading strengthens steadily from 12-months to 6-months to 3-months and strengthens from January to February to March. The IFO is the most upbeat reading for German manufacturing in the table.

EU Commission Indexes: The EU Commission industrial survey for Germany contrarily shows sequential weakening from 12-months to 6-months to 3-months and that signal is further reinforced by monthly sequential weakness from January to February to March.

The industrial indicators, as a group, paint a mixed picture of German manufacturing.

Other European IP reporters Other early reporters of industrial production data in Europe include France, Spain, Portugal, and Norway. France reports sequentially weakening output. Spain reports sequentially strengthening output. Portugal reports somewhat mixed trends but shows output declining on balance over all three horizons. Norway shows declines in output that worsen slightly over 6 months compared to 12 months; it still logs a gain over 3 months in the face of a small decline posted in March and no change at all in February.
by:Robert Brusca
|in:Economy in Brief
Canada| May 05 2023
North American Jobs Trends Continue Strong
Jobs in Canada rose by 41,400 in April, an acceleration from the approximately 35,000 gain made back in March. This compares to a gain of 21,800 in February and it shows acceleration in overall employment growth on that timeline. On a broader timeline that looks at average gains over 12 months, versus six-months and versus three months, we find gains accelerate over 6-months compared to 12-months, then decelerate over three-months compared to 6-months.

Looking at month-to-month changes, job growth across sectors, and major groupings, accelerates from February to March and from March to April. And although job growth overall does not accelerate on a broader timeline, job diffusion shows that the breadth of accelerations improved from 12-months to 6-months, to 3-months. That means it accelerated in an increasing proportion of categories.

Canada, much like the U.S., with an inflation problem, and a central bank that is hiking rates, has a resilient labor market.

The Canadian unemployment rate at 5% in April is unchanged for five months in a row and that unemployment rate is tied for the seventh lowest unemployment rate on data back to 1990. Canada’s unemployment rate hit is low on this timeline of 4.9% in June and July of 2022. On this timeline, the Canadian unemployment rate has been this low or lower only 1.5% of the time.

Jobs in Canada accelerate steadily only in the transportation sector looking at changes over 12-months to six-months to three-months. However, there are slowing job gains sequentially for the goods sector, in construction, and for professional and technical workers.

While job market aggregates in Canada remain strong, there clearly is also some evidence of softening as we certainly would expect given the inflation overshoot and the actions by the Bank of Canada to try to rein inflation back in.

Canada's labor force participation rate at 65.6% in April is unchanged from March and only slightly lower than it was in February 2023. The overall rate continues to cruise slightly below its pre-COVID pace when the participation rate was as high as 66.1%.
by:Robert Brusca
|in:Economy in Brief
Global| May 04 2023
Service Sectors Support Global Composite PMI Firmness
The average unweighted composite PMI readings from S&P Global for April show another monthly increase as the average ticks up to 51.5 from 50.5. The median moved up to 53.8 in April from 52.8 in March.

Small, if against the grain, changes The movement in the various series are small; however, what is striking is that they are movements against the grain at a time that inflation is high and central banks are still raising interest rates – and have been doing so for some time. Just yesterday, the Federal Reserve hiked interest rates and today the ECB put in another rate hike on top of its rate profile. In both cases, inflation is still well above their targets and only now is the U.S. short-term interest rate starting to be on an even-keel or slightly higher than the major inflation indexes used to gauge inflation in the U.S.

Resilience or bad analytics? The perception that economies have been resilient in the face of rate hiking is a perception that comes largely from the fact that rate hikes have gone on for such a long time. In the case of the U.S., it's a record increase of interest rates in this rate hike cycle. While, on the face of it, that sounds impressive, the fact of the matter is simply that the U.S. had allowed itself to get so far behind the inflation rate when it rose, that it has taken a record run of rate increases to get the federal funds rate marginally above the trailing 12-month rate of inflation… on a few measures. And the ECB is not there yet. So, people who like to look at rate increases and gnash their teeth over how the market is performing, and growth has endured, have been somewhere between surprised and disturbed at economic resilience. But, if you're the kind of person who looks at the levels of real interest rates relative to inflation, then you have understood what's been going on and why there's nothing particularly remarkable about this. Even so, it's surprising that as central banks, the Fed in particular, have taken away stimulus - even though rates haven't really gotten to a restrictive mark - growth has held up as well as it has.

A unique paradigm It is difficult to compare these times to any other times because the world's economies are so much on the same cycle because of COVID having struck. COVID struck all countries that about the same time and from that point countries have had slightly different experiences with their economic recoveries, but all of them are recovering from the same sort of shock not so much from the disease but from the policies that were pursued to try to contain the disease.

So… how good is growth? To assess the global PMI data, please shift over to the right-hand column; it shows very moderate queue percentile standings. The average standing is at the 63rd percentile with the median at a 69th percentile standing. Percentile standings place the current observation for each economic unit in the queue of data from January 2019 to date. The queue percentile expresses the position of the current observation in that queue of data. On this metric, the median for the period occurs at a ranking of 50%. So, these rankings this month are ‘firm’ rankings of 63% in standing, 13 percentage points above the median which means that 13% of the observations lie between the median and the current value. It also means that the highest value lies some 37% above the current value. In contrast, the range percentiles position the current observation between the highest and lowest values of the period expressing the current reading as a percentile of the high-low range.

Momentum Momentum is also telling, and we see a big difference between what's happening in the last few months and the broader trends. In the current month of April, there are only five out of twenty-five jurisdictions that show slowing; this compares to nine in March and five in February. In April, there are only four jurisdictions with PMI values below 50 (where PMI diffusion values say activity is contracting); there were only six in March and only six in February. Looking at averages over three months, we get similar sorts of statistics with five jurisdictions below 50 and five jurisdictions that are slowing. But over six months, eight of the twenty-five jurisdictions are below 50 and fourteen of twenty-five are slowing. Over 12 months compared to 12-months ago, there are seventeen jurisdictions that are slowing and six with PMI values below 50.
by:Robert Brusca
|in:Economy in Brief
Europe| May 03 2023
Unemployment Rate in EMU to Fresh Record Low in April
The unemployment rate in the European Monetary Union had reached a new low at 6.5% in March, down from 6.6% in January and February. On data back to the year 2000, Germany and France both have new low levels of unemployment. All the members of the monetary union listed in the table with the exception of Luxembourg report unemployment rates that are below their historic medians. Luxembourg is above its median by a small amount with a rank percentile standing at its 52.9 percentile; it's median occurs at its 50th percentile.

Among the twelve countries that report in the table, only two show about employment rates that are not below the 30th percentile in ranking; Luxembourg and Spain whose standing is at its 31.7 percentile. Portugal is close at the 29.4 percentile, Austria is at the 25.6 percentile with Greece at a 24.8 percentile standing.

There also are rank percentile standings below their 16th percentile – seven of them. Unemployment rates continue to broadly fall in the European Monetary Union despite high inflation and despite ongoing rate hikes by the European Central Bank. There are other central banks in Europe hiking rates as well as a substantial array of hikes is being executed in the United States – hikes from the U.S. continued at the Fed’s meeting today.

Rate declines in EMU Among the 12 reporting EMU countries, all but four have unemployment rate declines over three months; two of them, the Netherlands and Luxembourg, have no change in their unemployment rates over three-months. Over 6 months all but three countries have declines in their unemployment rates and over 12 months all but five countries have declines in their unemployment rates among the twelve European Monetary Union countries listed in the table.

In comparison, the United States has a decline in the unemployment rate in March. On the same timeline, it has an unemployment rate that is in the bottom 2% of all unemployment rates since 2000. The U.S. employment rate is unchanged over three months and six months, but it's lower by one-tenth of one percentage point over 12 months.

The unemployment rate profile that we see in Europe is surprising in part because inflation rates in Europe remain so high - although the rate hikes in the United States have been more extreme than in Europe and the U.S. unemployment rate has remained low, unemployment rates in Europe surprise in the wake of ECB policy as well. In the European Monetary Union, the unemployment rate has fallen by 3-tenths of a percentage point over 12 months, more than it's fallen in the U.S.
by:Robert Brusca
|in:Economy in Brief
Global| May 02 2023
Manufacturing PMIs Show Some Improvement But Amid Clear Ongoing Weakness
Month-to-month manufacturing PMI changes were mixed in April with increases in eight of 18 observations (two unchanged by assumption because of missing data). Except for the U.S., the largest economies generally worsened in the month (Euro Area, Germany, France, the U.K, and China).

The progression to better (or less bad) conditions is clearer looking at three-month changes. The three-month averages of the manufacturing PMIs show weakening compared to 6-months in only 5 of 18 categories. Over six months things shift again, and PMIs are better in only 6 of 18 categories. Over 12 months, this trend continues as only 5 of 18 are better.

These metrics underscore that the current progression to ‘better’ (...or not as bad) is relatively recent and that the concept of ‘better’ applies just to comparisons over very recent months since over 6 months and 12-month conditions broadly are worsening.

That is hardly surprising… When we turn to engage with the column on rank or queue standings of the level of diffusion readings, weakness is the overpowering result. The median standing is a 24-percentile standing; that places the median for the group in the bottom 25 percentile of all observations since January 2019 – that is an extremely weak median.

One version of this month’s data is that there is some sort of revival going on… another version is that… “Well, yes, things are better, but not by much.” I am much more in the second camp than in the first camp. Still, it is notable that central banks have been hiking rates and inflation remains far too strong in most countries/regions and yet there has been some improvement in economic activity. Even if it is a minor effect, it is contrary to expectations and for that reason still notable.

The median manufacturing PMI value for each of the last three months as well as each of the three sequential periods referred to above, the PMI medians all are below 50 – indicating that contraction is most common.
by:Robert Brusca
|in:Economy in Brief
Japan| May 01 2023
Confidence in Japan Moves Up But Is Still Quite Weak
Japan has in progress a sharp rise in confidence over recent months. The rise in confidence is particularly sharp since February of this year. Most components were last higher in February 2022, over a year ago. For employment, willingness to buy durable goods, and for ‘the value of assets’ the last stronger observation is slightly more distant.

Despite a rise in confidence that is particularly notable over the past two months, there are still low standings for the level of confidence and for its components in April. The ‘all households’ confidence rank is in its 16.6 percentile; for two-person households, confidence is in its 19th percentile.

No components of confidence stand above their respective medians on data back to 2002. The strongest category is employment, with a 46-percentile standing. The weakest is the 7.2 percentile standing for ‘willingness to buy durable goods.’

As for momentum, the 3-month and 6-month changes in the headline as well as the component survey values are larger than the increase over 12 months for all categories except employment where the 12-month gain exceeds the gains over both 3-months and 6-months. That tells us that employment has been steadily improving while other components had seen most of their gains relatively recently. Apart from that, the 3-month change across components as well as for the headline, accounts for most of the gain in the various reading ranging from 81% to 94% of the six-month gain. In one case, for income growth, the three-month change is larger than the six-month change.
by:Robert Brusca
|in:Economy in Brief
Europe| Apr 28 2023
EMU Returns to Growth; EMU Dodges ‘Rule of Thumb’ Recession Signal
The European Monetary Union (EMU) dodged what could have been a trigger for the call of a “rule of thumb” recession in the Area when GDP failed to fall for the second quarter in a row. The flash estimate for GDP in the EMU in the first quarter of 2023 is +0.3% annualized; this compares to a -0.2% annualized in the fourth quarter of 2022. Call it whatever you will, it certainly is a flat spot in economic growth. Growing only 0.3% at an annual rate after falling by 0.2% does not give an economy much momentum. Clearly, this is a point of weak growth. While it may not go over the bar for the call of recession, conditions in the monetary union remain weak. Inflation remains high. The European Central Bank is still raising rates to fight inflation, and the war between Ukraine and Russia continues to boil over in Europe, casting a pall across prospects for growth and prosperity in the European Monetary Union itself.

Early reporters stay out of ‘recession trap’ In these early returns, there were only six monetary union members out of 19 that report individual country GDP this early. Out of these six only two, Germany and Italy, log negative growth in the fourth quarter. German GDP fell by 2.1% while Italian GDP fell by 0.5% (both of those are expressed at annual rates of change). However, currently there are no countries that are reporting back-to-back declines in GDP either (but Germany DOES report a decline in GDP year-over-year). So, neither the monetary union nor any of its early reporting members have triggered the rule of thumb call on recession of two consecutive quarters of negative growth. At this point, Germany has the weakest statistics among this group with GDP having fallen 2.1% at an annual rate in the fourth quarter and grown by only 0.2% at an annual rate in the first quarter of 2023. German GDP is down on balance over the last two quarters as well as year-over-year.

Year-on-year growth Year-over-year growth in the monetary union is at 1.3% in the first quarter, down from 1.8% in the fourth quarter which was down from 2.5% in the third quarter which was down from 4.4% in the second quarter of 2022. There has been a steady deceleration in growth in the monetary union; we see decelerations common for member countries as well. Belgium is showing deceleration, Germany is showing deceleration and Portugal is showing deceleration. The exceptions are France, Italy, and Spain. France shows a speed up in its year-over-year growth at 0.8% in the first quarter compared with 0.4% gain in the fourth quarter; but up to that point French GDP had been decelerating too. Similarly, Italian GDP had been decelerating until this first quarter result where GDP is now up by 1.8% year-over-year, stronger than the 1.4% gain in the fourth quarter of 2022. Spain has been more of a rogue with decelerations in two of the previous three quarters but now in the first quarter 2023, a clear acceleration in growth at an annual rate of 3.8%, up from 2.9% in the fourth quarter period. Spain not only bucks the trend for deceleration it actually posts quite a strong GDP growth rate year-over-year on top of its relatively solid 1.9% pace in the first quarter itself.

Big vs. small country trends However, the consolidated data at the table bottom, grouped to look at the four largest economies versus the rest of the monetary union, show that the largest economies continue to decelerate although the deceleration of the first quarter is ‘technical’ since the one-digit growth rate is 1.1%, the same as in the fourth quarter of 2022. For the rest of the monetary union, deceleration remains in progress as the first quarter growth rate at a 2% pace compares to 3.8% at an annual rate in the fourth quarter of 2022. The two data series also point out that growth has been slower, at least for the past year, in the four largest countries compared to the smaller countries in the rest of the union.

Comparison with the U.S. I include U.S. data in this table to compare the performance in the monetary union with the U.S. economy. The U.S. shows less of a tendency for deceleration in GDP since and the third quarter of 2022 U.S. GDP speeds up then it slows down in the fourth quarter and now it speeds up again in the first quarter 2023. So that's not much of a dependable pattern and it doesn't conform to the clear encroaching weakness that we see in the monetary union. The recent weakness in U.S. growth in the first quarter of 1.1% is more substantial than the 0.3% logged in the first quarter for the European Monetary Union and that's on top of the much stronger 2.6% pace logged in the fourth quarter of 2022 compared to a 0.2% decline for the monetary union and back to the third quarter as well when U.S. GDP grew at a 3.2% annual rate compared to a 1.5% annual rate gain for the monetary union. However, EMU year-over-year growth had previously surpassed the U.S. regularly, mostly because of the stronger growth in the smaller EMU economies.

Slowing in progress There is some sense in which the U.S. and Europe are going their separate ways, but there's also a sense in which there has been some considerable slowing in both of those economies. The U.S. case seems to be a little bit more complicated whereas the European Monetary Union seems to be on a broader smoother glidepath to lower rates of growth. This is interesting from the standpoint that the U.S. has also been much more consistent and aggressive with its rate hiking while the European Central Bank has been slower with its rate hiking and still has its benchmark interest rates much farther below its rate of inflation than is the case for the United States (where the PCE headline has just fallen below the Fed Funds rate). Based on that, we might have expected U.S. monetary policy to have slowed the economy more than in Europe, but of course these things are complicated; it's also true that U.S. money supply growth had previously surged much more than money supply had surged in Europe. If we turn the discussion to one of leads and lags in monetary policy, it's very possible that what we're seeing in the United States is still the evidence of a lagging monetary policy where past stimulus is still pushing the economy ahead and where the more recent move to slow the economy has not yet taking its full bite out of U.S. economic growth. These concerns continue to linger in the background.

Sizing up growth If we look at annual growth rates and array them on a queue standing from the late 1990s, we find three European economies that still have relatively solid year-over-year growth based on their own historic standards. Italy's growth rate at 1.8% has a 78-percentile standing, Spain’s growth rate of 3.8% has a 76-percentile standing, while Portugal's 2.5% year-over-year growth rate has a 68.5 percentile standing. All of those are well above their historic medians. The European Monetary Union itself has a growth rate of 1.3% that has only a 37-percentile standing. The percentile standings in the rest of the union for early-reporting countries are low: for Belgium there's a 32.6 percentile standing, for France a 28-percentile standing, and for Germany an anemic18.5 percentile standing. Germany has the only year-over-year negative growth rate in the Monetary Union in the first quarter. By comparison, the 1.1% U.S. growth rate has a 29.5 percentile standing. The U.S. year-on-year growth rate of 1.6% is higher than the growth rate for EMU, but when compared to the year-on-year growth rates over earlier quarters the U.S. has been relatively weaker than the performance in the monetary union.
by:Robert Brusca
|in:Economy in Brief
Europe| Apr 27 2023
EU Commission Indexes for EMU Show Minimal Uptick
The EU Commission indexes that evaluate the European Monetary Union, its members, and sector results for April, show the smallest possible uptick for the overall index to 99.3 from 99.2 in March. This calls for popping the cork on a champaign bottle and then drinking none of it- a sort of dry celebration. The April value of the index has a 46.9 percentile standing, leaving it still below its historic median. The median on these ranked data occurs at a ranking of the 50th percentile. So, a technical ‘improvement here’ but really nothing to celebrate- a waste of the bubbly.

Monthly changes The overview of sector results shows a setback in April for the industrial sector that fell to a net reading of -3 from -1 in March. The construction sector was unchanged at a rating of plus-one in both March and April. The retailing sector improved to -1 in April from -2 in March; the services sector improved to +11 from +10; and consumer confidence improved to -17.5 from -19.1.

Standings are firm across sectors for the most part…but NOT overall These monthly changes leave the assessments of sector performance quite mixed. Consumer confidence has the weakest ranking at a 15.4 percentile standing, which is quite weak. The industrial sector has a 57.2 percentile standing, above its median, but not impressive. Services do better with the 65.9 percentile standing, retailing has a quite-firm 78.3 percentile standing, while construction continues to score a relatively strong standing at its 85.4 percentile. But as you can see from the rankings, the sector rankings really scatter quite widely and the extreme depressed state of consumer confidence has a large impact on the overall Monetary Union index since only consumer confidence is below its historic median and that's enough to drag the entire overall index below its historic median for April.

Countries month-to-month 18 of 19 member countries report in April and of these, eight show month-to-month deterioration while ten show approvement. However, the data are quite mixed on the month as the declining reporters generally show quite severe declines with five of eight declining entries showing monthly drops of 1.6% or worse. Among the countries reporting improvements in the month, 6 show increases of better than 1% and four show increases of 1.6% or better month-to-month. April becomes a month of some considerable divide among the reporting countries with a number of quite good responses and also significant number of quite bad responses. The number of respondents showing month-to-month deterioration has been relatively stable in recent months with seven countries reporting declines in March and eight reporting declines in February; the number in February being the same as the number in April.

Country standings The percentile standing data for the countries is significantly less upbeat than the percentile standing statistics by sector. Among the five sectors (as we saw above) four of them have standings above their medians with two sectors posting firm to strong queue standings. On a country-by-country overall index basis there was only one strong country entry and that's from Malta with a 94-percentile standing with Greece and Italy having standings we would consider to be on the firm side, above the 70th percentile, but still below the 80th percentile. All-in-all there are only five countries with percentile standings above their medians and 13 countries with standings below their medians. The European Monetary Union evaluates as much stronger when we assess it by looking at sectors rather than looking at country rankings. It's not particularly clear why this is true, because it's not as though the countries assessed positively are the largest economies. The two largest EMU economies have standings well below their historic medians while the 3rd and 4th ranked largest economies have standings above their historic medians and among the remaining 14 countries only three have standings above their historic medians and they aren't particularly large countries.
by:Robert Brusca
|in:Economy in Brief