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| Aug 08 2025
Japan’s Economy Watchers Index Rebounds
Japan's economy watchers index is showing some rebound after a period of weakness. The economy is not breaking out into sharply improved readings; however, the monthly readings have now increased and improved for three months in a row for both the current and the future indexes. The increase for the current index over three months is 2.6 diffusion points; for the future index it's 4.6 diffusion points. Over 12 months, both readings are still lower on balance.

Percentile standings-rankings Both headline readings are still below their historic medians, but the current index has a 34.8 percentile standing and the future index has a 39.5 percentile standing. The headline queue standings in both cases are below 50%- a reading below 50% indicates a reading below its historic median.

Diffusion readings Current index components all have diffusion readings below their respective 50 marks, which tells us that they're all showing contraction. The surveys show a headline reading of 45.2 for the current index in July, compared to 47.3 for the future index in July. For the current index, all of the component rankings are below 50 for July, June and May. For the future index, there are three readings above 50 in July and none for June or May.

July’s Future Index improvement The improvement in July for the future index is concentrated in eating and drinking places, services, and employment – all are households or individual-linked readings. That may reflect some sense of relief that Japan’s tariff negotiations with the United States were progressing and finally a deal was struck. The future index, in addition to having several diffusion readings above 50 in July, shows three readings that have queue standings, above the 50th percentile, putting them above their historic medians. Those are readings for eating and drinking places, services, and for housing. The reading for housing takes on a 59.3 percentile queue standing even though its diffusion index remains below 50 at 47. In July it moved up to 47, making a relatively sharp gain from a reading of 42.7 in June.

There is, therefore, relatively more evidence of improvement going on in the future index compared to the current index where monthly gains were generally smaller.

The breadth of improvement Month-to-month the current index improved in 60% of the categories in July compared to 70% in May and June. The future index components improved across the board in July, 80% of them improved in June, and gains were across the board again in May. Looking at the changes over three months, six months, and 12 months according to average data, over three months 60% of the current categories improved compared to none over six months and 80% over 12 months. For average future data, 100% improve over three months, none improve over six months and 60% improve over 12 months.
by:Robert Brusca
|in:Economy in Brief
Germany| Aug 07 2025
Downdraft for German IP
Industrial production in Germany fell by 1.9% in June and continues to show weak performance on trend. Yesterday's report on German industrial orders was weak. The table below on German industrial production shows the orders results presented with other output data and industrial surveys for Germany and some other key European economies that report manufacturing and industrial data early.

Today's industrial report shows a 1.9% decline in German industrial production in June after slipping 0.1% in May and falling by 1.6% in April. The three-month annual rate change in industrial production is a decline of 13.4% at an annual rate; that stepped up from a 1.8% annual rate decline over six months and from a 3.5% annual rate decline over 12 months.

Broad sector-wide manufacturing weakness Consumer goods output fell an outsized 5.6% in June. The sequential annualized growth rate for consumer goods is -4% over 12 months, -6.3% over six months and -22.7% over three months - an accelerating pace of decline. Capital goods output fell by 3.2% in June. Its sequential pattern is not as clear a decelerating pattern as for consumer goods, but it's substantially indicative of the same trend with a 4.6% decline over 12 months, an annual rate decline of 2.2% over six months and then a stepped-up decline of 19% at an annual rate over three months. Intermediate goods output fell by only 0.6% in June, but it has a string of negative values coming into June. Its sequential growth rates show a drop of 5.3% over 12 months, a drop at a 1.2% annual rate over six months, and then an outsized drop of 16% at an annual rate over three months. The profile for German industrial production is extremely weak, broad, and disappointing.

Construction weakness as well Construction output rose by 1.3% in June; however, it's coming off of declines in both May and April and its sequential growth rates become progressively weaker from 12-months to 6-months to 3-months, culminating in a -9.9% annual rate decline over the last three months.

Industrial surveys are more upbeat Surveys of industrial conditions in Germany are actually more positive than the orders data from yesterday or the industrial production data in today's report. The ZEW current reading shows an improvement from May to June as well as from April to June. The IFO manufacturing survey shows no change in the index in June compared to May, but it's stepped up compared to April. IFO manufacturing expectations show improvements in a sequence, from April to May to June. The EU Commission industrial survey shows deterioration in June compared to May and also in June compared to April- it is the survey ‘outlier.’ The sequential survey averages over 12 months, six months, and three months for all four surveys show improved readings over three months compared to the respective 12-month averages. The survey data are more encouraging than either the output or the orders data.

Other European trends Manufacturing trends for other early reporting European countries, France, Spain, Portugal, and Norway, show largely better performance in June for these countries compared to the German results. Portugal's June report is an exception; a 3.6% decline in output in June is large. However, over three months, all four of these European countries have better performance than Germany. Portugal still logs in decline in output but a decline of only 0.4%, much better than the numbers reported by Germany over three months. In each of these countries France, Spain, Portugal, and Norway, there were increases in output over 12 months ranging from 2.4% in France to 4.1% in Norway, as German output fell by 3.5%.

Quarter to date (Q2-results) Quarter-to-date (QTD) IP shows declines for all these German measures; the sole increase among the German indicators is for real manufacturing orders. Surveys for Germany on a QTD basis show positive changes compared to the previous quarter. The other European countries show strength, a 15.9% rise in output in France, a gain of 1.6% at an annual rate in Spain, a smaller 1.3% annual rate decline in Norway, against a sharp 10% annual rate reduction in output in Portugal for the quarter to date.

Ranked performance of growth rates and surveys The second column from the right memorializes the queue (or ranked) standings of current readings over a 25-year span. The result of this exercise is to find German orders, output, real sales, and all of the surveys with the rankings below their 50-percentile mark, putting them all below their medians for the last 25 years. This is in sharp contrast to ‘other Europe’ where France, Spain, Portugal, and Norway all have rank standings at about the 75th percentile or higher when we compare growth rates over the last year to what they have done over the last 25 years. Clearly Germany is lagging badly.
by:Robert Brusca
|in:Economy in Brief
Germany| Aug 06 2025
German Orders Fall Again, Unexpectedly
German orders expressed in real terms fell by 1% in June after falling by 0.8% in May. Foreign orders fell by 3% month-to-month after rising 3.8% in May. Domestic orders came back to life rising by 2.2% in June but only after a sharp 7.5% drop in May; that drop had been preceded by a 2.8% increase in April. The gyration and trend performance of orders is still choppy and, for the most part, weak.

Order trends Sequential growth rates show that overall orders for Germany (still expressed in real terms) rose by 0.6% over 12 months; however, they fall at 4.7% annual rate over six months and fall at a 0.5% annual rate over three months. Foreign orders rise by 7.4% over 12 months; over six months the gain is at a 13.7% annual rate, and over three months that pace is reduced to a 7.3% annual rate. German domestic orders fall by 8.6% over 12 months, then decline at an extremely rapid 26.1% annual rate over six months, and continue to decline at 11.1% annual rate over three months. For the time being, orders have been propped up by strength in the international market while domestic orders continue to languish and to contract.

Real sales Sector sales, expressed in real terms, rose by 1% and those across all the components after seeing widespread contractions in May that had followed an uneven performance in April. Real sales for manufacturing fall by 1.5% over 12 months, fall at a 1.9% annual rate over six months, and fall at an annual rate of 9.2% over three months. Real sales trends are not reassuring.

European Surveys on Industry Survey results for the largest economies in the European Monetary Union show slippages in June compared to May as three of the four large economies weaken (with Italy being the exception). Over three months France logged a weaker reading compared to six-months, Germany improved, Italy's performance is unchanged; Spain reports a result that's better by a single tick on the survey index comparing 3-months to 6-months. Comparing the 12-month to averages to 3-month averages for the four large European economies, shows deterioration that's across the board with the slight exception of Italy.

Quarter-to-date (completed Q2) The quarter-to-date (QTD) performance in Germany for orders are strong, rising at a 13.1% annual rate. Sector sales show deteriorated real sector sales across most sectors on QTD basis; manufacturing sales fall at a 2.9% annual rate.

Longer term evaluations The two right hand columns evaluate the growth and level performance of these various metrics on real sector sales and on a level basis and well as on annual growth rates. Total orders and foreign orders ranked on levels are well above their 50% mark, which puts them above their median on data back to 1994. Domestic sales levels have only a 21.8 percentile standing, extremely weak. Rankings on growth rates show total orders at a 45.9 percentile ranking, below the median growth rate (which occurs at a ranking of 50%). However, foreign orders’ growth ranks in the 70th percentile, quite firm, while the domestic growth rate queue ranking resides in the lower 10.7 percentile of its range. Growth rates for real sector sales are mostly below their 50-percentile mark except for consumer nondurables and consumer goods sales overall (which, of course, are boosted by the sales of consumer nondurables). The industrial confidence indicators for European economies that are from diffusion surveys are evaluated relative to historic levels only. All of them score weak results. The best queue standing is Spain with a 37.5 percentile standing, followed by Italy at a 24.8 percentile standing. France has a 14.6 percentile standing, while Germany has a 7.4 percentile standing. These range from weak, and below median, to very weak.
by:Robert Brusca
|in:Economy in Brief
Global| Aug 05 2025
Service Sectors Prop-up Global Economy
The S&P Global PMI indexes once again showed mixed performance in July. Most large economies continue to do better, and the total PMI services sectors continue to make up for shortcomings in manufacturing.

Stability on a low growth path In July, 24% of the reporting countries showed activity was slowing; that's down from 48% in both June and May and indicates some progress. Only five of the reporting jurisdictions have PMI values below 50 indicating economic contraction in July; that July figure compares to five in June and seven in May. Declining activity continues to be an unusual event. Medians and average readings for the group of 25 countries or regions show extreme stability in the recent months as well as across sequential averages.

Growth moderately improves Comparing period averages from 12-months to six-months to three-months, unweighted readings of the U.S., the U.K., and European monetary union show extremely flat PMI values oscillating between values of 51.2 to 51.7 on those period averages; over three months, six months, and 12 months. The jurisdictions in the table show PMI readings below 50 are rare; once again declining activity is an unusual event. The proportion of reporters slowing over three months is 34.8% compared to 52.2% over six months and 30.4% over 12 months. Once again, we see these statistics tilted toward improving growth rather than towards slowing

Summing up The queue percentile standings for the group in July have an average value at 48.4% which is below the 50% mark that coincides with the median for the period. This tells us the growth is largely worse than what its median has been over the past 4 1/2 years. On a queue ranking basis, the largest economies consistently perform better with readings above the 50% mark for the U.S. and for the European Monetary System including each of its four largest EMU economies (Germany, France, Italy, and Spain). Japan has a queue standing in its 57th percentile. However, China’s percentile standing is in its 26th percentile and the U.K. is at its 40.5 percentile. Not all large economies are in the catbird seat, but most are faring well despite the moderate growth track globally.
by:Robert Brusca
|in:Economy in Brief
Global| Aug 01 2025
Manufacturing PMIs Rank Low and Show Ongoing Weakness
Manufacturing PMIs in the S&P framework were mixed in July. However, the median reading edged slightly higher rising to 48.6 in July from 48.5 in June. But both of these are significantly weaker than the 49.1 reading in May. Manufacturing continues to post PMI readings that are below 50 indicating sector contraction on a fairly broad basis in July among the 17 reporting countries in the table plus the euro area. Only India and Vietnam reported PMI readings above 50 indicating sector expansion in July. In June, three of these jurisdictions showed readings above 50; in May, only three had readings above 50 as well. It remains a difficult time for manufacturing globally.

The readings for the manufacturing PMIs also show slippage in the medians from 12-months to six-months to three-months. The 12-month median is 49.2, the six-month median at 48.8, and the three-month median at 48.7. The bottom line is that most manufacturing sectors show contraction, and the contractions are generally getting slightly worse.

However, on an individual basis over three months about two-thirds of the reporters showed an improvement. Over six months just under 40% showed improvement and over a year about 44% of them showed improvement compared to the year before. Only the three-month versus six-month comparison shows a majority of reporters indicating better performance in July.

The ranked or queue standings metrics that place these individual readings for July in their queue of data over the last 4 ½ years, show standings above 50% which put the individual readings above their medians for this period. And only six of these eighteen reporting jurisdictions sported readings above 50%. Those were for the euro area, Germany, France, and India. India has a rating well above 50% at its 96th percentile; Malaysia has a reading above 50% and Vietnam has a reading well above 50% at its 74th percentile.
by:Robert Brusca
|in:Economy in Brief
Europe| Jul 31 2025
Unemployment in EMU
The overall EMU-wide and EU-wide unemployment rates were steady in June. For the EMU the rate is 6.2% and for the EU the rate is at 5.9%. According to data back to January 2020, the EMU rate has been this low or lower 1.3% of the time while the EU rate has been this low or lower 2.6% of the time. The EU rate at 5.9% is just above its all-time low (of 5.8%) on this horizon while the EMU rate remains at 6.2%, which is its all-time low on this horizon.

In June, four of twelve reporting EMU members logged month-to-month drops in their unemployment rates against only two where unemployment rates rose. This compares to May when seven members reported lower rates of unemployment. In April, nine reported unemployment rate drops.

Sequential data over 12 months, six months and three months show unemployment rates falling in six of 12 EMU members, over all three horizons: three-months, six-months, and twelve-months.

Among the 12 reporting members in the table, only three have unemployment rates above their respective medians since 2000 (rankings above 50%) in this period.

Elsewhere the U.S. unemployment rate fell in the month and was otherwise stable over the past year. The U.K. claimant rate of unemployment has snake higher beginning in May. Japan’s unemployment rate remains anchored at 2.5%. Among these three countries, the U.K. has an unemployment rate above its historic median at 62.7%.

European growth has been slow as the emerging GDP data for 2025-Q2 are confirming. But the labor market in Europe remains very solid. Inflation seems to be winding down in Europe. Europe may even be in for some growth turbulence because of the new U.S. tariff policy. However, for now, the labor market looks quite solid, and growth remains the orders of the day even if it is slow.
by:Robert Brusca
|in:Economy in Brief
Europe| Jul 30 2025
EMU GDP Slows; But It Creeps Ahead at a Slightly Sub-standard Pace
GDP growth in the European Monetary Union slowed to an annual rate of 0.4% in the second quarter of 2025 after logging a very solid 2.3% growth rate in the first quarter. Year-over-year growth has slipped to 1.4% in the second quarter compared to a 1.5% year-over-year pace in the first quarter; however, the second quarter year-over-year growth rate is still a little ahead of the fourth quarter pace in 2024 when it grew by only 1.3% and it is stronger than the third quarter of 2024 when it grew at a 1% pace. While EMU GDP growth has slowed quarter-to-quarter, the year-over-year pace has a moderate ranking. The pace ranked on all growth rates since 1997 leaves the year-over-year pace of 1.4% at a 42.4 percentile standing; that's below its median for the period (the median occurs at a ranking of 50%). However, it's not that short of the median and it indicates that growth is moderately slower than it's been over the past period back to 1997.

Growth by Size The Four Largest: The four largest economies in the monetary union grew at a 0.5% annual rate in the second quarter, compared to 1.2% in the first quarter and 0.8% in the fourth quarter of 2024. The four largest EMU economies (Germany, France, Italy, and Spain) have GDP-weighted growth of 0.8% over four quarters, the same as in Q1. That growth rate ranks in its 37th percentile, well below its median pace since 1997.

The Rest: The ‘rest of EMU’ grew at a ‘technically positive’ annual rate of 0.1% in 2025-Q2. That slow-crawl is quite weak, but it follows a 5.3% pace in Q1. The rest of EMU grows at a very solid 3% pace year-over-year in 2025-Q2 and logs 3.0% or better growth rates for three quarters in a row. The year-over-year pace ranks in the top one-third of all growth rates for the rest of EMU group since 1997-Q4. While the Q2 pace is very slow, in context, it does not seem to be an issue.

EMU Median Growth: The median growth rate for all of EMU is considerably weaker overall than the growth for the Rest of EMU. In 2025-Q2, however, the median pace is 0.7%, down from 1.1% in Q1. The year-on-year pace over the past four quarters for the EMU has been gradually slowing and is at 1.1% year-over-year pace in 2025-Q2. That growth rate for all of EMU is weaker than the ranking for the large countries as well as for the rest of EMU.

Compared to the U.S. Growth in the U.S. jumped to 3% in Q2 and logged a year-on-year pace of 2.0%. The U.S. logs the third strongest year-on-year pace in the table for Q2. Still, compared to its own historic experience, the U.S. growth rate ranks poorly in its 31.8 percentile, the lower third of its historic queue of growth rates. In relative terms, only two EMU member countries in the table rank lower.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Jul 28 2025
U.K. CBI Distributive Trades Survey: Still Very Weak - Depressing
The severe lethargy in U.K. retail and wholesale sales continues into July with the outlook portion of the survey for August still exceptionally weak.

Distributive sales retail volumes Sales in July: In July, the distributive trades volume survey finds sales for a year ago with 34% of the respondents indicating weaker sales compared to those indicating stronger sales. This net reading of -34 is a slight improvement from June’s -46 and signals deterioration compared to May (-27) as well. However, beyond the monthly bumping up and down, the ranking of this net reading is in the lower 8.5 percentile marking it as truly an exceptionally weak reading. The reading for orders compared to a year ago shows better comparisons but still a great deal of weakness and a net reading of -21, compared to -51 in June and -41 in May. It marks a 20th percentile standing, which is better than for sales compared to a year ago but still exceptionally weak. The next reading that, essentially is seasonally adjusted, comparing sales for the same time of year, shows a -10 reading which is better than -37 in June and better than May’s reading of -19 and steps up to a percentile standing at its 42nd percentile. It is still short of its median (which occurs at a ranking of 50%) but is a reading that looks a little closer to the land of the living than the land of the dead.

Expected sales in August: The distributive volumes statistics for sales expected for August, looking a month ahead, shows negative readings across the board for these same 3 metrics with all three of them improving in August from their July expectations; however, sales compared to a year ago have a 7-percentile standing, even weaker than their current July reading, orders have a 23.5 percentile standing, and sales for the time of year fare much worse with a 6.7 percentile reading - much worse than the current performance ranked for July. In short, there's very little in this survey that is encouraging or reassuring. Conditions are weak and even where there is improvement the new reading is still very weak and the expectations readings, while somewhat improved, are still extremely weak.

Distributive sales wholesale volumes Sales in July: The distributive trades survey for wholesaling produces another set of weak readings that are, for the most part, weaker in July than they were in June and, while different, not much better, or worse than they were in May. The percentile standings for wholesaling show sales compared to a year ago at a 7.4 percentile standing, orders compared to a year ago at a 3.2 percentile standing, and sales for the time of year at a 1.8 percentile standing. All of these are simply exceptionally weak.

Expected sales volumes in wholesaling: Turning to the expected sales for August once again, all the readings are net negatives; two out of three of them show some improvement compared to their July values; however, the rankings remained exceptionally weak. Sales compared to a year ago are at a 9.1 percentile standing, orders compared to a year ago are at a 5.3 percentile standing, and sales for the time of year are at a 2.1 percentile standing. The results for expected sales and orders in the wholesaling survey are extremely grim.
by:Robert Brusca
|in:Economy in Brief
Global| Jul 25 2025
Global Money Supply Begins to Show Divergences; Watch the Green Line and Don’t Get Sleepy
Hypnotists are just trying to get you to focus on something and concentrate on it so that you can relax and they can put you into a hypnotic trance. Right now, you want to make sure that does not happen as you watch what is going on with money supply. It is not ‘entrancing’ and ought to be followed. The chart shows you that trends - and often excesses in ‘global money supply’ growth have begun in that money center country, the United States of America. And… well… here we go again? While it's very early in the game, it looks like, after a period of monetary weakness and re-escalation, U.S. money growth is now beginning to step up in the U.S. Meanwhile, in Europe and in the United Kingdom, money growth, especially real money growth, is beginning to tail off. All this is at a time when Japan's money growth, of course, has been marching to the step of a different drummer showing regular, consistent, nominal weakness and actual declines in the real money stock to try to tame its incipient inflation.

The Policy Zone We are no longer in the COVID era; or even in the post-COVID era. We are now in the post post-COVID era. And monetary policy is being made based on conditions rather than remedy perceived legacy problems in the economy from COVID. We need to make that transition in our analysis too, and ask ourselves, “What's really happening?” In the U.S., the popular dogma is to claim that central bank independence is being undercut and that Donald Trump's tariffs are going to raise the inflation rate and that the Fed is losing its battle with inflation and inflation is coming because of excessive fiscal policy and the imposition of tariffs. It's a story you can believe if you want to. There's certainly some evidence to support those points; whether they completely justify that point of view, it is still too early to say. However, clearly, money supply growth in the U.S. is ramping up. The U.S. 12-month growth rate is up to 4.5%, over six months the annualized rate hits 5.5%, and over three months the annualized rate hits 6.9%. It's hard to say that that's occurring because of Trump's tariffs. At the same time, the growth rate in real money balances - that's money supply deflated by the CPI - has boosted its growth rate from 1.8% over 12 months to a 2.9% annual rate over six months to a 4.4% annual rate over three months. Is the chase on for an inflation ‘uptick’ that will not be temporary?

Follow the leader, or go your own way? It will take some time to tell if the other money center countries are going to follow the leader or not. So far it looks like ‘or not.’ Money supply growth in the European Monetary Union (EMU) is actually decelerating slightly from 2.8% over 12 months to a 1.7% pace over six months to a 1.3% pace over three months. Similarly, in the EMU the growth of real balances has slipped from 0.8% over 12 months to a 0.2% annual rate over six months to a -0.6% annual rate (contraction) over three months. So far, euro area money supply is not tagging along with the U.S. trend.

Euro-credit trends Meanwhile, private credit growth in Europe has stabilized with the 12-month growth rate of 2.3% that moves up to 2.4% over six months and settles back to 2% over three months, a relatively stable performance that would seem to signal ongoing moderate growth. The growth rate of private credit, deflated for the effects of inflation, shows continued growth, and beyond that the trend is unclear. Over 12 months the growth rate is 0.3%, over six months that improves to 0.8%, and over three months it drops back to a 0.1% pace. I'm not good enough at splitting hair to be able to tell you what that trend is.

U.K. money weakens In the U.K., nominal money supply growth seems to be slowing, but that isn't crystal clear, with the 3.5% annual rate over 12 months moving up to a 4.1% annual rate over six months been slipping back to 1.7% over three months. It may take a few months to be able to tell if the step down to 1.7% is real or just volatility averaging out the step up over six months. U.K. money growth does not appear to be excessive or rogue; when we look at real balances, 12-month growth is -0.4%, six-month growth is -0.1% and the three-month growth rate is -1.6%. On that profile, real money growth in the U.K. does not appear to be following the U.S. rule book either.

Japan- dealing with its own complex issues We know that Japan has been off on its own for a while. Japan clearly has been fighting off a bout of inflation. But, since that development is relatively new, and the previous battle with deflation was relatively long-lived, if we think in terms of inflation averaging, Japan is still dealing with an extremely small problem. Despite the appearance of some real inflation (depending on the price index you look at to establish Japanese inflation trends), Japan's inflation overshoot in contexts is only making up for lost time.

Money growth in Japan is 0.9% over 12 months; however, it's only running at a 0.1% annualized over six months and over three months. The growth of real money balances in Japan is negative. Real balance growth rates are negative on balance over three years and two years; the 12-month growth rate for real money balances is -2.3%, over six months it is -2.2%, and over three months it is -2%. The degree of restriction has faded but faded only very marginally. The main point is that in Japan, real money balances are contracting and so there is a fight to reduce inflation going on behind the scenes and that's clearing up; you can see it in the money growth rates on the chart as well if not from the level or real interest rates. Japan is balancing complex needs.
by:Robert Brusca
|in:Economy in Brief
Germany| Jul 24 2025
GfK Consumer Climate Steps Back After a Rise and a Pause
German consumer climate fell to -21.5 in August after logging -20.3 in July; July had posted a slight deterioration compared to June which had a -20.0 reading; however, previously in May the reading had improved sharply to -20.8 from -24.3 in April. The month of May had seemed to signal an improvement that took the climate readings from the -24 to -25 range into the -20 range. And while the -20 level held for three months in a row, there's now been a deterioration back to -21.5 in August and some renewed concerns about the economy.

Resilience and questions... So far there has been a good deal of economic resilience in Germany and in Europe; however, the recent deal by NATO members to spend 5% of GDP on defense is channeling a lot of that money to the United States to purchase missiles to help Ukraine in defense against Russia. However, 1 1/2 percentage points of that military spending pledge can actually be infrastructure spending that can be used for domestic purposes to bolster military preparedness and operations. Therefore, that portion of the spending, at least, remains as stimulus for the European economy.

The inflation setting Inflation in the euro area is basically at ‘target’ for the headline and close to it for the core; the year-over-year core rate is about 2.3%. Even so, Europe is looking at a pace that's close to 2%, but still higher than 2% after a long stretch of inflation being over the 2% target. In today's press conference, ECB President Christine Lagarde, speaking on the inflation picture and outlook in the EMU, said that the bank's target was an intermediate target and that the ECB expected inflation to be at its target over the intermediate term. The question I would have for her and for the ECB at this point is whether that means that the inflation target has become “aspirational” and is no longer operational? If the ECB is going to be happy with an inflation rate that stays above 2% as long as it thinks that ‘in the intermediate term’ inflation is going back to 2% has something significant changed? And since all forecasts are notoriously wrong – is this now a credibility issue for the ECB?

German eco-climate In Germany, the GfK measure is for August; components for the climate measure are up-to-date through July. Economic expectations took a turn lower after posting 20.1 in June; they slipped to 10.1 in July. The most recent observation of record for income expectations, however, advanced from 12.8 in June to 15.2 in July, continuing a string of improvements. The propensity to buy metric worsened and remained negative at -9.2 in July compared to -6.2 in June. The overall climate metric is now at its weakest since April 2025; economic expectations are their lowest since April 2025. Income expectations are trending higher, nonetheless. The propensity to buy metric at -9.2 in July is at its weakest reading since February 2025; but that was a single-isolated low, setting that observation aside, the ‘propensity to buy’ is the weakest it's been since August 2024. The German consumer clearly hasn't recovered in terms of having faith and purchasing power restored even though income expectations have risen more substantially.

Queue standing assessments In terms of the queue percentile standings (ranked data observations), climate has been weaker than this 11.5% of the time, economic expectations have been weaker 59% of the time, income expectations have been weaker 50.7% of the time, while the propensity to buy has been weaker only 29.1% of the time. Economic expectations are above their median - above a ranking value of 50% - while income expectations have only returned to their median estimate, marginally above 50%, at a reading of 50.7%. The propensity to buy languishes at the bottom 1/3 of its historic queue of values. The climate headline remains in disaster territory.

Other Europe: Other EMU and the U.K. These observations for Germany contrast to observations in the rest of Europe where data lag. Consumer confidence metrics for Italy, France, and the U.K. are up-to-date only through June. And through that period, Italy shows the last two observations a little bit stronger, France shows the most recent two observations as, very similar, but weaker than April, while the U.K. shows the progression towards stronger readings from April to May to June. However, the rankings for these countries are quite mixed. For Italy consumers held confidence in June at a 73.2 percentile standing, relatively firm, while in France the standing is at its 26.4 percentile and in the U.K. it is at its 37.5 percentile. The climate in Germany is exceptionally low although the readings for the European countries in the table are somewhat more similar to the readings for the German climate components that are up-to-date through July.
by:Robert Brusca
|in:Economy in Brief
Japan| Jul 18 2025
Japan’s Ex-Fresh-Food Ex-Energy Inflation Runs Hot
No one will be critical of Japan’s efforts to free itself of its torpor into disinflation and deflation that it suffered for many years. The Bank of Japan struggled long and hard to remove the contraction in prices from its economy since falling prices can have a pernicious effect on growth and investment. Japan still faces challenges: it has a contracting population and faces dealing with tariff demands from the United States as negotiations on that front continue to drag and have become harder to settle than Japan had expected. Despite the current inflation overshoot, on data back to January 2011, Japan’s to-date inflation is only averaging 1%; that is still well below its 2% target and ample reason for the Bank of Japan to continue to move carefully to corral inflation especially if inflation has stopped accelerating – as it seems to have done. Against this background, we look at Japan’s CPI report.

Current inflation: June Japan has dispatched deflation and currently faces an inflation problem. In June, the BOJ’s preferred gauge for the CPI excluding fresh foods & energy rose 0.4% month-to-month for the second month in a row; it rose by 0.2% in April. Japan’s headline inflation rate seems to have fallen into line A traditional ‘core reading’ excluding all food & energy flies under the BOJ’s target pace. But the BOJ’s preferred inflation gauge shows a 3.4% rise over 12 months and then gains at a pace of 3.7% over both six months and three months. All of those numbers are too hot to handle.

Line-items Education costs in Japan are falling sharply and sequentially. Medical care costs are deescalating too. And while food & beverage prices continue to overshoot, 2% by a wide margin, the pace of total food & beverage inflation has been falling. No broad category has steadily accelerating inflation. But the BOJ’s preferred gauge of inflation, a specialized core measure excluding energy & fresh foods, sees inflation ramping up and staying high over three months and six months.

Diffusion/breadth Among the eight major categories, year-on-year inflation has accelerated compared to where it was one-year ago in four of the eight. Inflation is above the 2% benchmark for four of eight categories as well.

Acceleration or not... The chart on sequential inflation for the BOJ’s preferred core gauge shows that this measure has accelerated since August or December of last year and since then has more or less marked time oscillating without any clear trend.
by:Robert Brusca
|in:Economy in Brief
Australia| Jul 17 2025
Aussie Business Confidence -National Australia Bank Survey
The National Australia Bank (NAB) survey for June shows a jump in Australia’s business confidence to 5.1 from 2.2 in May and those compared to a reading of -0.7 in April. The sequential averages show a steady improvement from a 12-month average of 0.2 to a six-month average of 1.3 and to a three-month average of 2.2. The monthly May reading is at 2.2. With the June reading moving up to 5.1, it looks like this progression toward improvement remains in train.

Smoothed assessments Smoothing out the monthly data shows that the three-month smoothing operation switches the progression from 12-months to six-months to three-months to reveal improvement that has stalled out. Looking at 12-month averages, there's an improvement over six months compared to 12-months, and then a slight set-back over three months.

Components The components over three months show improvement in train for about half of the categories, compared to 43.8% improving over six months and 25% improving over 12 months. The sense of improvement across categories has been broadening over the more recent periods.

Standings Percentile standings on the data back to 2002 show above-median standings in seven of the thirteen survey categories. Over this period, business confidence itself ranks slightly below its median with a 49.5 percentile standing; the median occurs at a standing of 50-percentile. The index of business confidence is currently close to its median on this, but slightly below it. However, the rankings for the three-month moving average and the 12-month moving average both are considerably lower, indicating that much of the improvement that we see in the Australian index is relatively recent.

Summing up Australia remains caught up in tariff negotiations with the United States along with every other country, a factor that extends uncertainty and could be holding back progress in the economy. However, the current survey suggests that progress is in train, nonetheless.
by:Robert Brusca
|in:Economy in Brief