Introducing

Robert Brusca

Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.

Publications by Robert Brusca

Europe| Sep 19 2023
EMU HICP and Core: Turning the Corner on Excess Inflation s-l-o-w-l-y
Inflation in the European monetary area continue to be strong with August rising by 0.6% month-to-month after rising 0.4% in July and 0.2% in June. The closely watched core measure turned weaker in August rising by 0.3% after a 0.5% gain in both June and July.

Monthly inflation basics Among the four largest euro area members, all but Spain showed inflation increases month-to-month. Posting a 1.4% increase in its July HICP, August brought a much lower 0.7% increase. And what was a significant month-to-month deceleration for Spain was also the second largest monthly headline gain among the Big Four economies. Core inflation for the four largest economies accelerated in only two of the four largest economies. Germany showed inflation excluding energy rising to 0.4% in August after a 0.2% gain in July; Italy's core crept up by 0.1% after being flat in July. The core inflation rate in France edged up 0.1% month-to-month after a 0.5% gain in July, while Spain’s core rose by 0.4% in August after rising a sharp 1.1% in July. Spain’s 0.4% core gain was a deceleration and also tied for the strongest month-to-month core gain across the Big Four economies in August. Comparisons always are complicated when you look for context.

Trends in general When cast in terms of annualized inflation trends – 12-months to 6-months to 3-months- the trends were substantially mixed with negative results over three months. Inflation decelerations were broadly posted over 6 months compared to 12-months and for 12-month inflation rates compared to their values of 12-months ago. Headline inflation over 12 months broadly decelerates compared to 12-months ago while core inflation broadly accelerates.

Headline vs. core trends-acceleration/deceleration Headline inflation in August rises 5.3% over 12 months. That decelerates to a 3.3% pace over six months then ramps up to a 5.2% pace over three months. The 3-month pace is sharply higher than the 6-month pace; and the 3-month pace is only a tick weaker than the year-over-year gain. Core inflation in the EMU is up by 5.4% over 12 months then decelerates to a 4.8% pace over 6 months. Over 3 month inflation comes back to life with the EMU core rising by 5% annualized, on balance a speed-up over 6 months and a moderate slowing by less than one-half of one percentage point comparing the 3-month pace to the 12-month pace.

Sequential trends Looking at these same trends for headline inflation sequentially, all headlines show slower gains over 12-months compared to 12-months ago and another slowdown follows over 6 months compared to 12-months. But over 3 months headline inflation accelerates in all Big Four economies with two of them showing faster inflation over 3 months than over 12 months annualized. Inflation over 3 months accelerates compared to 12-months in Germany and Spain while it decelerates in France (by one-half of one percentage point) and in Italy where the inflation rate is nearly halved over 3 months compared to 12-months.

Core inflation sequentially Core inflation is more interesting from a trend standpoint. It shows year-on-year accelerations in three of four of the largest EMU economies compared to its 12-month pace of 12-months ago. Only Spain shows less pressure over 12 months. Over six months core inflation pressures drop broadly across each of the Big Four economies and by significant amounts. But over 3 months inflation accelerates in two countries and decelerates in the other two. Inflation surges to a 7.9% annual rate in Spain over three months, topping both its 6-month and 12-month pace. In Germany, ex-energy inflation picks up from 3.6% over six months to 3.9% over three months and still shows a two-percentage point back down from its year-on-year pace.

Oil continues to be a disinflation factor The bottom of the table chronicles the performance of oil prices showing Brent is still favorable monthly falling in both July and August -as well as declining on balance over 12 months, 6 months and 3 months.

Inflation evaluation-strange brew The table shows still unacceptable inflation levels and less than reassuring trends across the largest EMU economies as well as for the weighted-average impact of all member countries on EMU itself. With an inflation objective of about 2%, the ECB finds the five-year headline gain (compounded pace) at 3.6% compared to 2.6% for the core rate. Headline inflation over five years for the Big Four range from a high of 4% in Germany to a low of 3.1% in Spain – had I tried to tell you ten-year years ago that would happen, you never would have believed me! And this is for inflation over five years – not a monthly quirk. Core inflation over five years averages the highest among the four largest EMU economies in Germany at 3.2% and the lowest in Italy at 2.3%.
by:Robert Brusca
|in:Economy in Brief
Canada| Sep 18 2023
Canadian Housing Starts Weaken; Broad Saw-tooth Declining Pattern for Still-resilient Starts
Canadian housing starts have been in a pattern of saw-tooth declines from their 2021 peak. However, starts, viewed broadly, in a longer-term framework, are still quite firm. Starts are higher than their August 2023 level in only twenty-three of the last thirty-seven months, on data back to August 2020. Yet, the August 2023 reading is higher than nearly all monthly results prior to August 2020 (only seven exceptions on data back to January 1990 - 367 observations before August 2020). As a result, I view weakness in housing as limited and recent.

In Canada, housing is not weak and is holding up well. This is despite a 5-year mortgage rate of 5.99% in July, up from rates at or below 3.3% from January 2021 through September 2021. On data from January 2021, Canadian 5-year mortgage rates average 4.12% Their current 5.99% level in July is significantly higher. But interest rates and inflation rates move together and inflation rates are now moderating.

Canada’s 5-year mortgage rate is at 5.99%; historically it has been even higher from May 2006 through December 2008, more or less consistently. From January 1990 through December 2003, it also was above 5.99%. The current mortgage rate is high relative most recent historic experiences but not so much in a broad historic context. Still, mortgage rates moved up above their average since January 2012 (4.12%) as of April 2022 and rates have been elevated ever since. The five-year mortgage rate is currently on its cycle high, but it is only higher by 11 basis points from its level of eight months ago. The momentum for rising rates has dissipated.

The period of interest rate shock would seem to be over for the housing market. Canadian house prices have fallen year-over-year for only four-months in a row (April 2023- July 2023). On data back to 2000, housing prices in Canada rose by double digits only from June 2006 to January 2007… until during the Covid period, when prices rose by double digits from April 2021 through May 2022. House prices in July 2023 in Canada are still stronger than April, May and July of 2023 and are lower only than a string of months from April 2022 to March 2023.
by:Robert Brusca
|in:Economy in Brief
Japan| Sep 15 2023
Japan’s Tertiary Sector Recovers in a Trend-dominated Report
Japan's tertiary index (service sector index) recovered in July, rising to 101.8 from 100.9 in June after it had reached 101.6 in May. The July recovery brings the index of tertiary sector activity up above its May level and leaves it with a relatively high year-over-year ranking of its growth rate’s top 10 percentile standing on data since 2011. In contrast, industry stepped back to an index reading of 103.8 in July from 105.7 in June. The July value is still above its May value, but the sector’s growth ranking has it in its 20.5 percentile, approximately the lower one-fifth of its historic level by ranking. The industry index is 4.6% below its level in January 2020 before COVID struck; the tertiary index is higher by only 0.2% since COVID struck. These two sector indexes have been either weak or lethargic over this 3½ year period.

Economy watchers indexes deliver a more upbeat reading; these diffusion indexes in July are all above 50 indicating expansion for the overall index and for the individual sectors the Economy watches index assesses. In July, the headline improved and most components improved, except for eating & drinking places and the overall metric for the services sector slipped to 57.5 in July from 60.7 in June but this reading still registers sector expansion. The economy watchers indexes have a growth ranking, for the most part, in the 80th to 90th percentile, the exception being a weaker ranking for employment growth.

The Teikoku readings are also diffusion indexes; they indicate more weakness than the economy watchers survey. Manufacturing, retailing, wholesaling, and construction all have readings below the 50% mark indicating weakening growth. Services post a 51.7 diffusion reading, a reading that improves relative to June and indicates sector expansion. The growth ranking on the Teikoku indexes has manufacturing below its historic median for growth. Retailing and services have rankings above their respective 80th percentiles, marking them as relatively strong in terms of momentum.

It is not surprising to have these somewhat sensitive diffusion indexes giving us slightly different perspectives on what's going on in the various sectors. This month the good news from the METI sector indexes is for services improving and that's important because services are the employment generating sector; the employment growth ranking in the economy watchers framework is the relative weakest barometer among the various sector assessments in that survey.

The chart of the METI indexes for services and industry shows that not much has changed in the Japanese economy of late. The tertiary (services) index has continued to plug along somewhat sluggishly while the industry reading (mining and manufacturing) has been more volatile in a narrow range; it is currently riding a down cycle. But everything in the table for the month seems to be a reading in the normal flow of recent trends.
by:Robert Brusca
|in:Economy in Brief
Europe| Sep 14 2023
Inflation in EMU Accelerates…Despite This Chart…
EMU inflation (month-to-month annualized) advanced at a 7.5% annual rate in August, up from a 5.7% pace in July. The year-on-year pace is at 4.2%. Countries showing the year-on-year pace of inflation faster than the overall EMU pace monthly are France, Germany, Italy, Portugal, and Ireland.

Inflation HAS broadly decelerated Inflation broadly decelerates over 12 months compared to its pace of 12-months ago. Every country in the table shows deceleration on this basis. The deceleration of inflation on this basis is -5.7 percentage points for the EMU overall; the median deceleration across members in the table is -6.1 percentage points. The greatest deceleration on this timeline is the -16.5 percentage-point drop off in the Netherlands, followed by a -11.1 percentage-point drop in Belgium, and a -10.5 percentage-point drop in Greece.

Compared to a year ago, the drop of in inflation is terrifically large. But that now seems to be a trend of the past that is withering.

The road ahead has more twists and turns Economists warn that the hard part of inflation reduction lies ahead. When oil prices fall, they can unwind inflation substantially, broadly, and quickly. But once inflation has been high for a while, other prices begin to trend with it and the higher inflation rate becomes entrenched. A dropping inflation rate is good news; however, at some point, the pace of inflation needs to be the focus rather than just the change in the pace. The focus on other prices that become sticky if inflation lingers too high for too long, is usually a spotlight on wages, since labor seeks to get back the compensation it loses when inflation rises. So, wage gains rise at a faster pace and then policy is pushing to reduce both wage and price inflation.

Inflation progress is slowing…down…does anyone care? Over six months, prices decelerate in the EMU by -0.9% at an annual rate compared to their 12-month pace. But deceleration only occurs for five of the twelve economies in the table (the EMU pace represents all EMU countries and is formed using weights reflecting the size of member economies). The median deceleration for 6-months compared to 12-months for reporting members in the table is not for a deceleration at all but for an acceleration of 2.7 percentage points.

Over 3 months, EMU inflation rises to 5.2% annualized from 3.3% over six months, an acceleration of 1.9 percentage points. Among table members, there is, nonetheless, an average deceleration of 0.3 percentage points (annualized). That would become 1.2 percentage points if the pace held for one year. Over 3 months, six of twelve members show deceleration.
by:Robert Brusca
|in:Economy in Brief
Europe| Sep 13 2023
Industrial Output in EMU Falls in July; Capital Goods and Consumer Durables Output Drop
Industrial output and manufacturing output as well as sector detail for the European Monetary Union in July revealing drop in overall output and in manufacturing output, spurred by sharp declines in consumer durables and capital goods output weakness. Consumer nondurables show an increase in output of 0.4% in July while intermediate goods output is higher by 0.2% month-to-month in July. There is minor growth month-to-month in intermediate goods and nondurable goods, but that fails to offset the sharp drops in consumer durables and capital goods output.

Sequential trends are not reassuring Sequential growth rates from 12-months to six-months to three-months show manufacturing output falling by 1.7% over 12 months, falling at a 6.2% annual rate over six months, and falling at a 4.4% annual rate over three months. Output falls over each of these horizons, but it's not getting progressively worse although it still falls faster over three months than it does over 12 months. Consumer goods output follows this same pattern with the declines on all three horizons and no sign of progressive deterioration but still with output over three months weaker than the output decline over 12 months. Within consumer goods, however, consumer durables output shows progressive deterioration with a drop of 6.9% over 12 months bested by a drop at an 8.7% annual rate over six months that then worsens to -14% at an annual rate over three months. In contrast, consumer nondurables output also declines on all three horizons but falls at just a 0.5% annual rate over 12 months, then declines much more sharply at a 6.9% annual rate over six months but then trims its fall to just a 0.4% annual rate over three months - slightly less then its pace of decline over 12 months. Intermediate goods output falls on all horizons, but the drops become progressively smaller as there's a 5% drop over 12 months, a 2.8% annual rate drop over six months, and a 1.6% annual rate drop over three months. Capital goods output shows an increase year-over-year, but that gives way to progressive deterioration in growth rates as its 2.6% output gain over 12 months collapses to a 5.4% annual rate decline over six months, and that worsens to a 7.7% annual rate decline over three months.

Quarter-to-date growth On a quarter-to-date basis (July relative to the Q2 average for output) overall production and output in manufacturing drop at annualized rates of 5% and 8.5%, respectively. Declines occur in each of the sectors and in each of the consumer goods subsectors. The sharpest decline in output in the quarter is from consumer durable goods, declining at a 15.9% annual rate; that drop is followed closely by a decline at a 14.7% annual rate in capital goods output.

Output compared to its pre-Covid level Taking a longer perspective… looking at output compared to where it was in January 2020 before COVID struck, both manufacturing and industrial output are higher on balance by 1% for overall output and by 1.3% for manufacturing output. Consumer goods output is higher by 6% on that comparison, consumer nondurables output is higher by 6.1%, and capital goods output is higher by 6.7%. However, consumer durable goods output is lower by 2.3% and intermediate goods output is lower by 4.5% on that timeline.
by:Robert Brusca
|in:Economy in Brief
Global| Sep 12 2023
ZEW Survey in September Shows Broad Weakening in Germany, U.S., and EMU
Most responses in this new survey for the euro area, Germany, and the United States show weakening month-to-month. Ten of the observations weaken month-to-month while six show strengthening. The variables that strengthened month-to-month were the assessment of the U.S. economic situation, economic expectations in Germany, and stock market expectations in the euro area, Germany, and the U.S. On the foreign exchange side, the dollar is expected to strengthen vs. the euro. We continue to see a weaker economic situation signaled in the euro area and in Germany. Economic expectations for the U.S. are weaker as economic expectations for Germany strengthen. The ZEW respondents are optimistic regarding inflation as they see it getting weaker in all three areas. As a result of this, short-term rate expectations are weaker in the euro area as well as in the U.S. Long-term interest rate expectations are weaker in Germany and in the U.S. And given that optimism on inflation behaving and interest rates falling, stock market expectations are stronger in all three areas.
by:Robert Brusca
|in:Economy in Brief
Europe| Sep 11 2023
Industrial Sector in EMU and Europe Is Mixed in July
Output in the European Monetary Union in July remains a mixed phenomenon. Among the thirteen early reporters of industrial production, six of them show output declines in July, after ten of them had declined in June and five of them declined in May. Over the last three months there has not been a majority of countries showing output declines across all three months but there certainly is a critical mass of countries showing declines and a good deal of unevenness in output in the European Monetary Union. Out of 39 months-to-month changes (13 countries over 3-months), 21 of them showed declines (53.8%). In July among the four largest economies (Germany, Italy, France, and Spain), three of them showed output declines; similarly, 3 of the largest economies posted declines in June; however, in May, all four of the largest monetary union economies logged increases in output.

Sequential patterns: 12-months to 6-months to 3-months Sequential patterns in output are mixed. But looking at the diffusion index for the European Monetary Union overall in manufacturing, the three-month reading is below the six-month reading and the six-month reading is below the 12-month reading. The overarching view from the manufacturing PMI statistics is that there is ongoing weakness in the monetary union. Austria, Germany, Finland, Ireland, and Sweden (the latter not a monetary union member) each show declines in output over three months, six months and 12 months. The median for the monetary union overall shows a 2.1% decline over 12 months; output declines at a sharper 3.6% pace annualized over six months; that decline trims to a decline at a 1.3% annual rate over three months. The lesser decline in output over three months has a lot to do with a sharp 10.7% increase in output from Portugal, a 6.7% increase over three months in Spain, a 5.1% increase in the Netherlands, a 4.8% increase in Italy, and a 3.6% annual rate increase in France. Over three months there clearly is a collection of countries showing considerable strength. However, over three months Germany also shows a 9.5% annual rate decline, Austria logs a 7.9% annual rate decline, and some of the smaller countries post substantial negative numbers for output as well. Sweden, not a European Monetary Union member, logs a decline in output at a 12.6% annual rate over three months. Clearly, the monetary union and Europe are looking at relatively mixed conditions.

Accelerating output trends are weak but improving We also calculate in the table the tendencies for output to accelerate in the euro area on a month-to-month basis; 53.8% of countries show accelerating output in July compared to June. However, in June only 7.7% accelerated relative to May. In May 61.5% of the respondents showed output accelerated relative to April. Over three months 45.5% of the countries are showing output accelerated relative to six-months; over six months only 38.5% are accelerating relative to 12-months and over 12 months only 27.3% are accelerating compared to one year ago. The sequential growth rates on acceleration show that acceleration is a phenomenon that occurs in fewer than 50% of the respondents over each horizon (from 3- to 6-months and from 6- to 12-months). However, the proportion of firms experiencing acceleration has been steadily increasing; over three months at 45.5% the proportion is getting much closer to the neutral mark at 50%.

Quarter-to-date With July data, we have the first monthly observation in the third quarter. Quarter-to-date calculations look at the growth in July compounded over the second quarter average. The median for output in the second quarter in the monetary union is a decline of 3.2%; eight EMU member countries show negative numbers for output in the incipient third quarter with one-month’s data in hand.

IP growth rate rankings Ranking the year-over-year growth rates for industrial production on data back to mid-2006, only two countries in the table have a rank standing above their historic median growth rate over this span. France has a 77-percentile standing, and Malta has a 55-percentile standing. However, among the other large EMU member countries, Germany has a 25.4 percentile standing, Italy has a 32.7 percentile standing, and Spain comes close to having a median standing at the 49.8% mark. The median standing across all EMU members is much weaker at 23.4%.
by:Robert Brusca
|in:Economy in Brief
Japan| Sep 08 2023
Japan’s Economy Watchers Index and Outlook Weaken
Japan's economy watchers index slipped to 53.6 in August from 54.4 in July. It's a small slip that still leaves the index with a very high queue standing at its 92nd percentile. The index is lower on balance over three-months, but it's higher over six months and higher by 8.1 points over 12 months. The month-to-month setback seems to be something of minor importance…but momentum is waning.

The future index also slipped back to 51.4 in August from 54.1 in July. That index has a queue standing at its 75.9 percentile, still a firm-to-strong standing but not as strong as the current index. The future index is also weaker over three months and slightly stronger over six months and stronger over 12 months as well, but by just a small amount.

Current index While the current index is lower on the month and it is a minor setback, all components were lower month-to-month except for retailing. There was substantial breadth to the step back in August small though it may be. Many components still have extremely strong rankings. For example, the household sector, retailing, eating & drinking establishments, and services all have queue percentile standings above the 90th percentile. A substantial portion of the economy is still quite strong nonmanufacturers as a group have an 86.6 percentile standing. However, housing has a below-median 39-percentile standing, corporations taken as a whole have a 78-percentile standing, manufacturers have a 64-percentile standing, employment overall has a 55.7 percentile standing not far above its historic median as the median occurs at a rank standing at the 50th percentile.

Future index The future index shows weakness across the board with the headline and all components weaker in August than they were in July. The headline weakens and shows weaker components across the board for three months. Over six months three measures show declines: eating & drinking places, housing, and employment. The rankings in the future survey are generally strong but not as strong as for the current index. The future headline has a 75.9 percentile standing, households, retailing, eating & drinking places, and services all have rankings in their 80th percentile. Housing has the weakest standing at a 37.9 percentile, employment is below its median at a 47.4 percentile standing, corporations is at its 66.4 percentile, manufacturers are at their 60th percentile and nonmanufacturers overall are at their 76th percentile.
by:Robert Brusca
|in:Economy in Brief
Germany| Sep 07 2023
German IP Falls in July
Industrial production in Germany fell again in July, although the pace of decline let up from June. Industrial production fell by 0.8% in July following a 1.4% decline in June and a 0.1% decline in May; industrial production has fallen for three months in a row and in four of the last five months. Manufacturing output accelerated its decline, falling by 1.8% in July after falling by 0.9% in June. Manufacturing production had risen by 0.2% in May.

All three major sectors showed declines in output in July with consumer goods output falling by 1%, capital goods output falling by 2.9%, and intermediate goods output falling by 0.7%. This compares to June when only capital goods output fell, dropping by 3.3% while consumer goods output increased by 2.2% and immediate goods output edged ahead by 0.3%.

Sequentially, however, output continues to weaken as the 12-month growth rate is -2.2%, the six-month pace is -5.4% and the 3-month pace is -9.1%. Manufacturing mimics these declines with a 1.5% decline in output over 12 months, a 4.5% annual rate decline over six months, and a 9.5% annual rate decline over three months.

The construction sector drops in July, but it's sequential output path shows the deteriorating trend with construction output rising 0.8% over 12 months, falling at a 1.2% annual rate over six months and accelerating the decline to -3.5% annually over three months. Overall industry, manufacturing, and construction, deliver declining trends and declining trends that accelerate.

Real manufacturing orders and real sales in manufacturing both fell in July. Real sales fell for the second consecutive month-to-month decline; however, both real manufacturing orders and real sales show positive growth and a pickup over three months compared to six months, failing to echo the accelerating downtrend that we see for output overall and for manufacturing and construction in the industrial production report.

Industrial indicators for Germany show greater weakness in July compared to June for the ZEW current index, the IFO manufacturing index, IFO manufacturing expectations, and the EU Commission industrial index. The industrial indicators do not echo the decelerating trend from 12-months to six-months to three-months that we see for industrial output. However, each of these manufacturing measures is weaker over three months than it was over six months, indicating a greater move towards weakness over the last half year or so although not stretching the trend back to 12-months.

There are some early output data available for Portugal and Norway in July. Portugal shows output increase in July while Norway shows a decline. Norway shows industrial output falling in June; however, both Portugal and Norway demonstrate output declines over 12 months and worse declines over six months. But that trend transitions into growth over three months. Portugal shows output growing at a 10.7% annual rate over three months while Norway barely eeks out any gains at all rising at a 0.3% annual rate.
by:Robert Brusca
|in:Economy in Brief
Germany| Sep 06 2023
German Orders: What Turns Up…Must Turn Down
German orders turned sharply lower in July, falling by 11.7% month-to-month after rising strongly by 7.6% in June and by 6.2% in May. The sharp decline in July still does not turn the three-month growth rate negative. However, it sharply blunts what had been an incipient upturn and severely recasts the outlook for German manufacturing which for the past few months was seeming to have inexplicably brightened, whereas now it appears that May and June may have simply been a couple of rogue months of strength in an ongoing period of weakness.

Foreign vs. domestic trends Foreign orders in Germany fell by 12.9% in July after rising 11.9% in June and 6.8% in May. That series still carries a positive 17.5% annual rate of growth over three months. Domestic orders fell by 9.7% month-to-month in July after gaining 1.5% in June and 5.3% in May. For domestic orders, the three-month growth rate is a clear negative growth rate of 13.1%, at an annual rate. Over three months domestic and foreign orders are each moving rapidly and in opposite directions – that won’t last.

Sequential trends Sequential growth for German orders shows negative growth rates over 12 months and six months with those headline declines interrupted by a +3.8% annual growth rate over three months. That 3.8% gain is looking less authentic. It is out of context sequentially and strongly blunted in backtracking in monthly data. Foreign orders post a -11.1% annual rate over 12 months and a -12.5% annual rate over six months but grow at a strong +17.5% annual rate over three months. However, that three month-growth rate is severely crimped by the sharp downturn in July; it's extremely hard to understand what trend is really in play here for foreign orders in Germany. German domestic orders fall 9.8% over 12 months, followed by a 9.5% annual rate decline over six months, in turn, followed by a 13.1% annual rate drop over three months. The negative growth rates for domestic orders are persistent.

Quarter-to-date (QTD) orders In the quarter-to-date, because of the severe weakness in July, which starts the new quarter, we are looking at negative growth rates of 23% to 36% for total orders, foreign orders, and domestic orders in the newly started third quarter.

Real sales by sector Real sector sales for Germany show declines in July as sector sales in all the categories in June as well as in July; that compares to increases in all the categories but one in May. Even so, real sector sales growth in manufacturing is up by 1.4% over 12 months, flat over six months, and up at a 4.1% annual rate over three months. Consumer goods show negative growth rates over 12 months, six months, and three months. Capital goods show positive growth rates of 7.9% over 12 months, 2.3% over six months, and at a 12.1% annual rate over three months, demonstrating consistent growth and even acceleration on the three-month horizon. Capital goods manage to do this with the two most recent months showing significant drops in real sales- that undermines the trend. Intermediate goods show sales falling by 5.2% over 12 months, falling at a 1.4% annual rate over six months, and falling at a 3.3% annual rate over three months. Overall, the sales numbers generate positive gains over three months, but the sequential growth rates are not compelling – nor is the sector detail.

QTD trends broadly weak In the quarter-to-date calculus for the first month in the new quarter, there are negative growth rates across the board for all the categories of sales: headline sales, and manufacturing sales, both fall at a 4.6% annual rate. In the new quarter, the deepest decline is from consumer durables at a -20.9% annual rate.

EU Commission indexes show euro-weakness The EU Commission industrial confidence reading for Germany, France, Italy, and Spain shows negative readings for all four of those countries in July as well as in June and May. There is no hint of the German mid-year strength in orders. The industrial monthly changes on these metrics in June show deterioration for all countries on all horizons except for France; it registers a slightly less negative number in June compared to May, but then the French industrial metric posts a large negative reading for July. The industrial indexes in Germany, France, Italy, and Spain show worsening from 12-months to six-months to three-months for all four countries. The current queue standings for the industrial confidence measures for the four countries show the strongest readings for Italy and Spain with queue percentile standings in the lower 30th percentiles. Germany, and France post even weaker queue percentile standings in their 26th to 27th percentiles. All of these are weak readings.

Since Covid struck... Taking a longer perspective, looking at all the variables in the table compared to where they were in January 2020, before COVID struck, everything is weaker than its January 2020 level except for capital goods shipments; they are stronger by 4.2%. Total orders are lower by 8.4%, real sector sales and manufacturing are lower by 1.8%, and the EU industrial confidence indexes are lower by 1 to 2½ points in Germany and Italy and lower by about eight points in France and lower by 12.6 points in Spain.
by:Robert Brusca
|in:Economy in Brief
Global| Sep 05 2023
Composite PMIs Fade in August
The global total, or composite, PMI readings from S&P for August saw the slippage with both the average and the median readings for this group falling to lower levels in August compared to July after the average and median each had slipped in July relative to June.

Among the 25 jurisdictional readings in August, 19 of them show lower values in August compared to July, while 21 of them had shown lower values in July compared to June, and in June 21 of them showed lower values compared to May. There's a clear slowing going on based on aggregating individual results.

In August, 16 jurisdictions had diffusion readings below 50. In July, there were 19. Both months represent a sharp erosion from June when only five showed readings below 50. In diffusion terms, the reading of 50 is the line of demarcation between output increasing or decreasing.

Sequential readings over three months show 9 jurisdictions with average readings below 50, over six month 6 readings are below 50, while the 12-month habitat shows eight readings below 50. However, there is a sharp change in terms of slowing with 20 jurisdictions showing weaker 3-month averages than six-month averages whereas only five show weaker six-month averages than 12-month averages and only 8 show weaker 12-month averages than they had for the 12-month period of 12 months ago.

The Hi/Low percentile standings for individual countries show the percentile standings of the current months reading between the highest and lowest readings of the last 4½ years. In contrast, the queue percentile standings evaluate the current diffusion reading as a ranked position among all other readings, as in the top 90% of all readings or in the bottom 9% of all readings without regard to the actual magnitude of the reading; the reading is ordinal in percentage terms. The readings for the hi/low vs. the queue standings are quite different because the hi/low data are based on only three numbers while the queue standings are based on all observations in the period over which they are ranked. On data back to January 2019, the average and median low readings are in the 25 to 27 range for diffusion readings. The high readings are only at a level of 59 for the average and for the median. Because the low readings are so much lower (25 points from the lowest reading possible while high readings are some 40 points below the higher reading possible) the high low percentiles generate higher readings.

The queue percentile readings are quite weak, averaging a 42-percentile standing with nearly the same result as its median.

The composite PMIs blend the weighted readings for manufacturing and services in each responding unit. Weakness continues to be the order of the day, but it is still only creeping weakness since both the average and the median readings overall this month are above 50, indicating that expansion is still the most common result. A series of large countries and regions EMU, Germany, France, Spain, and the U.K. are below 50 on their composite readings; however, the U.S., Japan and China are still above 50 in August. But among all those large countries, only Japan improved month-to-month in August. Downward pressure remains in force broadly and among the large economies.
by:Robert Brusca
|in:Economy in Brief
Global| Sep 01 2023
Manufacturing PMIs Show Mixed Results in August
The global manufacturing sector showed uneven results in August with some of the larger economies showing some improvement, such as the euro area, Germany, France, and Japan. However, the U.K. and the U.S., both relatively large economies, show backtracking.

Among these 18 early reporting economic units, 10 of them show improvement in August. Looking at the changes in the manufacturing diffusion indexes between three-months and six-months shows improvement in six countries. Looking at the changes between six-months and 12-months, 10 countries show improvement. Looking at the changes between now in 12 months ago, there are only four that show improvements. Those four are Mexico, China, Russia, and India, but the data from Russia at this point are quite suspect since it is on a war-time footing. China, on the other hand, had been a long period of struggling as it has an entangled exist from Covid problems; it began to make some recovery. However, now it still struggles with various problems. China may not be an example of an economy on the upswing despite what the PMI trends are telling us. China does show deterioration over three months as does Russia.

We look at the median reading. The median for August is 48.8; this is slightly reduced from July's 49.2. However, August is still above June's level of 47.8. There's no discerning a trend from this choppiness. It's just clear that the manufacturing PMIs have been chopping around in an area below 50 showing some slight deterioration in the manufacturing sector, but there doesn't seem to be any trending in place. If we look at three-months compared to six-months compared to 12-months, we find the three-month average is at 48.5, just a tick higher than the six-month average at 48.4 which is the same as the average of 48.4 for 12-months. Once again, we get this sense the global economy has been frozen in this slight contraction phase that hasn't gotten better and hasn't gotten worse but with central banks fighting inflation and with this disruptive war going on between Ukraine and Russia. Given other geopolitical tensions, it's made the economic situation seem even more tenuous.
by:Robert Brusca
|in:Economy in Brief