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

Global| Jul 03 2023
Global Manufacturing PMIs Mostly Worsen in June
Among the eighteen reporters of manufacturing PMIs in June, only seven improve on a month-to-month basis. The table treats Canada as unchanged. Its June value is not available; for the purposes of statistics and aggregation, we're using the May value for Canada in June.

Over 3 months, 7 reporters show improved reading compared to 6 months. Over 6 months compared to 12 months, 8 reporters showed improvements in their manufacturing PMIs. Over 12 months compared to their level of 12-months ago, only four reporters show improvement: those are Mexico, Russia, India, and Indonesia.

For the most part, manufacturing continues to be under a great deal of pressure. The median reading for this group of countries this month is 47.8 on a PMI basis. However, despite the breadth of the deterioration, the median measure has not changed very much over the three horizons. In the table, over 12 months the PMI average is 48.8, over 6 months it falls to 48.1, and over 3 months it stabilizes at 48.2. All of these diffusion values show manufacturing activity declining on balance (all below 50), but declines are not getting worse according to the median statistics although they are getting worse based upon deteriorating breadth.

The ranking statistics show only five of these reporting entities with June readings above their historic medians. India has a strong 92-percentile standing, Mexico has an 88.5 percentile standing, Russia reports an 84.6 percentile standing, Indonesia has a 78.8 percentile standing, and Turkey has a 71-percentile standing. Apart from those, the standing of the other countries is generally much worse with the highest among the remaining countries being Japan at 48.1% and after Japan the next highest ranking being at 19.2% for Taiwan and for South Korea.

For some of the larger economies, the U.S. has a ranking for its S&P Global manufacturing PMI at its 5.8percentile, the euro area is at its 3.8 percentile, and the U.K. is at its 9.6 percentile. The large countries show a great deal of weakness in their manufacturing sectors; Japan is an exception.

Comparing these readings to where they were in January 2020 before COVID struck, there are only six countries that show better manufacturing PMI values in June 2023 than they had in January 2020. These are Russia that has a 4.7-point improvement, Indonesia that has a 3.2-point improvement, India that has a 2.5-point improvement, Mexico that has a 2.0-point improvement, Japan that has a 1.0-point improvement, and Turkey that has a 0.2-point improvement. By comparison, the median shows the decline of 1.7 points compared to January 2020. The euro area is weaker by 4.5 points and the U.S. is weaker by 5.6 points.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 30 2023
Euro Area Unemployment Rate Is Steady at 6.5%
Unemployment in the European monetary union continues at a very low level. The unemployment rate has come down and stayed down since peaking during the period of COVID. 2021 brought the largest decline in the unemployment rate to Europe while in 2022 the unemployment rate mostly stayed at lower levels; it has since worked to even lower levels in 2023.

The breadth of unemployment declines Twelve European Monetary Union (EMU) member countries report in the table; Five EMU members show declines in the unemployment rate in May compared to April. There had also been five declines in April compared to March, and there had been six declines in March compared to February. The breadth of the declines in the unemployment rates has been slightly less than 50% in terms of the number of countries affected; however, the proportion of countries experiencing declines in unemployment has been relatively stable.

Over the last 12 months, unemployment rates have fallen in seven of these twelve countries with the declines logged in three of the four largest countries; Spain is the exception seeing its unemployment rate rise by 0.1% over 12 months.

Unemployment rates in May range from a low of 2.9% in Germany and 3.5% in the Netherlands to a high of 12.7% in Spain and 10.8% in Greece.

The relativity of unemployment It's hard to compare unemployment rates across countries because of various labor market rigidities and differences in labor laws, custom-&-practice, and local unemployment treatment. Somewhat more telling is to compare the ranking of the current rate of unemployment to the history of unemployment country-by-country, the ranking of the current statistics. We do this on data back to 1994. On that basis, only Luxembourg has an unemployment rate that's higher than its median over this period. The median in these calculations occurs at a ranking of 50%. • Luxembourg's unemployment rate level of 4.9% is relatively low among EMU members; still, it's a rate that's above its own historic median. • Ireland with an unemployment rate of 3.8% has the lowest ranking unemployment rate among all countries in the table compared to its own history. • France comes next with the ranking of only 0.9% despite its unemployment rate being 7%. • Germany is next with the 2.9% unemployment rate that ranks 1.7% among the history of German unemployment rates back to 1994.

The ranking statistics, coupled with actual current unemployment levels, give you some idea of how different unemployment experiences have been across countries. The median ranking of the unemployment rates among the EMU members in the table is 14.1% while the average ranking is 19.2%. However, the ranking for the European Monetary Union overall based upon pooled and weighted data for the same period is 0.4%. The extraordinary difference between the ranking of the overall EMU measure and the average/median rankings of the individual members, reflects the fact that higher unemployment rates listed in the table are often for very small countries with small labor forces as well as that it also reflects the fact that unemployment rates are largely at very low levels for all countries at the same time causing the overall unemployment ranking could be even lower than the individual rankings. Only the ranking for Ireland is lower than the ranking for the entire European Monetary Union. That's an extraordinary result. It speaks to the breadth as well as the magnitude of the EMU unemployment rate decline.

U.S. and Japan In comparison, the U.S. unemployment rate at 3.7% has a 7.6 percentile ranking over the same period. Japan's unemployment rate, at 2.6%, has a 20.5 percentile ranking. Clearly, Japan has been used to having much lower unemployment rates than the European Monetary Union members generally.

Comparisons to Pre-Covid Since January 2020, before COVID struck, nearly all the EMU members report that unemployment rates are lower in May 2023. The exceptions are Austria, Belgium, and Finland among EMU members. The U.S. and Japan also are exceptions. Where unemployment rates are higher, they are generally only higher by 0.2- or 0.3-percentage points, except for Belgium where the unemployment rate is higher than January 2020 by one-half of one percentage point.

European trend Looking at the chart, we can see that for Europe COVID interrupted along ongoing decline in the rate of unemployment. COVID caused the unemployment rate in the EMU to shoot up sharply and then after making some slow and begrudging progress the EMU unemployment rate came down relatively quickly in 2021 and has come down further in 2023. However, it's hard to make statements about the recovery in the labor market by looking at the unemployment rates because COVID has also worked some mischief with employment with people's employability and with labor market participation rates as COVID put the fear of working into some people who otherwise had been gainfully employed.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 29 2023
EU Commission Indexes Continue to Log Weakness
The European Commission indexes for June show the overall index for the Monetary Union slipping to 95.3 from 96.4 in May compared to readings of 98.9 in both March and April.

Countries Among the 18 early reporting European Monetary Union (EMU) members, 13 show month-to-month declines in their overall indexes with one country showing an unchanged index. This compares to 14 showing month-to-month declines a month ago and to 9 countries showing month-to-month declines two months ago in April – the breadth of declines has expanded. The declines being experienced by the overall index are broadly distributed across monetary union members; over the last two months three of the largest four countries show declines in their overall country level indexes as well.

Sectors The sector indexes in June show month-to-month erosion in the industrial sector, the retail sector, in construction and in services. Only consumer confidence is improving slightly on the month. Among the five sectors, four of them have net negative measures with services being the exception posting a plus-6 diffusion reading in June.

Standings The percentile standings of the sector readings show retailing and construction with rankings above their medians. On this ranking metric, the medians occur at a reading of 50 so that any reading above 50 is above the median. Retailing has a reading in the 58.4 percentile while construction has a reading in the 77.6 percentile. However, services, the job creating sector, has a 42.6 percentile standing with the industrial sector at a 39.5 percentile standing. Consumer confidence has a 19.1 percentile standing.

Country level standings show only three of the 18 early reporters with standings above their historic median values. Greece, Cyprus, and Italy have above median readings in June. Among the Big Four economies, Spain has a 41-percentile standing, France a 39.5-percentiel standing, and Germany a 24.7-percentile standing. Italy leads the pack with the only above-medina standing at its 54.9 percentile.

Compared to pre-Covid activity All sector readings in June, including the overall EMU index, show weaker readings than those that existed in January 2020 before COVID struck. The EMU overall index is lower by 10 points than it was in January 2020.

No country is above its January 2020 level of activity. However, Italy and Greece both match their levels of activity for their overall country readings in January 2020 as of June 2023.

On balance, this performance suggests that in the wake of COVID everything remains weak while countries have been through several cycles of being hit by the COVID recession and trying to recover. The bottom line is an activity has generally been impaired compared to what it was in January 2020 and even now there have been some waves of recovery for the most part economies were damaged by the introduction of COVID and still have not been able to restore their past levels of activity.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 28 2023
Slight Climate Backtrack in Germany; Confidence and Money Growth Remain Weak in Europe
The GfK measure of consumer climate in Germany slipped in July, falling to -25.4 from -24.4 in June. Climate had been improving tracking back to a cycle low in October 2022; from that point onward confidence/climate been steadily, at least in a small way, persistent in improving monthly climate until this month. The climate reading for Germany remains extremely weak with a queue percentile standing (or count percentile standing) in the lower 5% of its historic range of values.

The components for GfK climate lag the headline by a month. Economic climate in June stepped back from a 12.3 reading in May to a 3.7 reading in June. This is the weakest reading since January 2023.

The income reading weakened to -10.6 in June from -8.2 in May, although it was last slightly weaker in April 2023. This was not as sizeable a step back for income expectations as it was for economic expectations.

The propensity to buy, in contrast, improved slightly to -14.6 in June from -16.1 in May. And this measure is stronger than most readings since August 2022, although it was slightly weaker than the reading in April 2023. The propensity to buy has been stuck and a range around -13 to -15 for quite some time. The reading slipped to net negative numbers back in February 2022 and has remained negative ever since.

Other European confidence measures The table also offers consumer or household confidence readings for Italy, France, and the United Kingdom. All three of these countries showed some degree of improvement in confidence in June compared to May, where June is the most up-to-date estimate now available. The estimate for Italy has a standing at its 75.9 percentile France is much weaker at a 14-percentile standing and the U.K. is closer to the French standing at a 26.7 percentile standing. Consumer confidence in Italy has been more robust than France and the U.K. on a ranking basis for some time.
by:Robert Brusca
|in:Economy in Brief
Italy| Jun 27 2023
Italian Business and Consumer Confidence Show Different Paths
On the month, Italian business and consumer confidence moved in different directions. Consumer confidence moved up to 108.6 in June from 105.1 in May. Business confidence settled back to 100.3 from May’s 101.2. Consumer confidence has been on an upswing in recent months while business confidence has been steadily eroding. Businesses and consumers are reacting to economic conditions in very different ways. For the most part, the consumer confidence survey this month is reasonably firm and better characterized as solid than as weak although it has its soft spots.

Consumer confidence for Italy in June has a 71.1 percentile standing on its queue of data back to the late 1990s. A 71-percentile standing is reasonably firm since the median for the series occurs at a 50-percentile standing. A 71-percentile standing is nearly halfway between neutral and the strongest possible reading, marking it as a very solid overall assessment.

The overall situation for the last 12 months improved sharply in June to a -69 reading from a much weaker -81 in May. The May reading at -81 was close to the mean for that reading on data back to the late 1990s; the move up to a -69 reading brings the standing to a 58-percentile mark, moderately above the median for the series.

Looking ahead to the next 12 months, the overall situation has just about the same standing at a 59.3 percentile standing and it has improved month-to-month slightly to a plus-one reading in June from minus-two in May, a much smaller improvement than the backward-looking assessment month-to-month. Unemployment expectations over the next 12 months have been deteriorating but at a slow pace; the step back month-to-month was to -15 in June from -13 in May. However, the percentile standing is extremely low at the 5.6 percentile mark. Concerns about unemployment are extremely low. The household budget assesses with a 61-percentile standing, having improved smartly to +14 in June from +8 in May, putting it back at its April and March levels. The 61-percentile standing is moderately firm.

Households assess their financial situation over the last 12 months with a 47.9 percentile standing as there was a small improvement to -39 in June from -41 in May. Looking ahead to the next 12 months, the outlook is weaker at a 26.6 percentile standing - this is one of the more troubling readings in the table. Still, the assessment of the financial situation over the next 12 months improved to -10 in June from -15 in May and the June standing of -10 compares to a historic mean of -7. Still, standing near its lowest 25 percentile is somewhat unnerving. But this may also be the result of a tight distribution of values in that neighborhood since the mean is at -7 and a value just 3-points lower drops it to nearly the lower one quarter boundary.

Household savings are evaluated at a 57-percentile standing, currently the month-to-month index retreated slightly to 56 in June from 61 in May. Future savings improved to -7 from -11 to a 99-percentile standing- extremely strong. Increases in high ratings on the ability to save aren't always a good sign because people that are saving are not consuming so this is another potential red flag in this report.

However, the environment for making major purchases currently improved slightly to -38 in June from -41 in May and it has a 46.2 percentile standing, below its historic median for the full period, but the median occurs at the 50-percentile mark, so the June reading is not terribly weak compared to the median just slightly below it.

Businesses saw their assessment fall month-to-month; June slipped to 100.3 in June from 101.2 in May. The percentile standing for the business sentiment index is at its 31.4 percentile, in the lower third of its historic values. This is quite a substantially weaker reading than for the consumer that has a 71.1 percentile standing.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Jun 22 2023
BOE Hikes Rates by 50bp as Agents Survey Remains Strong
The BOE’s Agents survey demonstrates that demand for consumer goods, consumer services and total services including exports have very strong - top 10 percentile standings. Total business services have a top 30-percentile standing. While inflation is flaring sharply, demand remains strong underlining that BOE policy may still have some ways to go to corral and reduce inflation.

Demand in the U.K. is strong, but output has a weaker standing in its 40th percentile, below its historic median. Exports of manufacturing goods are near their historic median (a 50% standing) while the construction sector in the U.K. is weak, at a bottom 10-percentile standing. Still, investment activity is rated at a still-solid 68-percentile standing.

Costs of imports, materials, and labor costs show historic standings in their top 20% to 15% to 3% with labor showing the strongest relative standing. Labor costs are a particularly pressing problem in historic profile. Prices have an even higher, top one-percentile standing: this applies to domestic prices, consumer goods, consumer services, and business-to-business services. In this environment, business profit margins are at a sub-30-percentiel standing.

The labor markets report recruiting difficulties at a 79-percentile standing and employment intentions are weaker, just below their historic median. Businesses report capital usage at only a 70th percentile standing.

In this environment with interest rates rising and inflation flaring, small, medium, and large businesses all report credit availability as challenging with low standings below the 15-percentile mark for businesses of all sizes and with large businesses reporting the most severe problem, but by only a small margin.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 21 2023
European Car Registrations Rise Briskly in May
Car registrations in Europe rose briskly in May, advancing by 10.5% from April as registrations (hereafter, sales) had fallen 12.9% month-to-month. Sales changes, calculated from three-month moving averages, increase month-to-month by 1.3% after a 1.7% April drop. Rather than viewing May as a strong man, it appears to be a rebound month.

Sequential growth rates show 12-month growth in European sales at 20.5%, a very strong pace. Over 6 months, registrations/sales were down by 1.2% at an annual rate. Over 3 months, they expanded at a 16.1% annual rate. Growth rates, calculated from three-month moving averages, show an increase over 12 months of 23.7%, a 6-month increase at a 2.4% pace and a 3-month increase at a 3.3% annual rate. Smoothing the sales shows steadier and continued growth in car registrations/sales in Europe. While the year-over-year gain is quite strong at 23.7%, the ensuing 3-month and 6-month growth rates are much more moderate in the 2½% to 3 ½% range, annualized.

Growth rates by country largely echo the headline as Germany, Italy, Spain, and the U.K. all show positive growth rates in May that are recovering from declines in April. France shows a 0.6% gain in May following a 1.2% rise in April, scoring 2 gains in a row but on much more moderate changes than those reported in other countries.

Sequential gains by country reveal extremely strong gains in Germany, Italy, and France, where the German three-month growth rate annualizes to 66.9%, France to 32.1%, and Italy to 23.4%. These contrast with Spain where there's a 20.3% decline in registrations and the U.K. that has a 48.5% decline in registrations at an annual rate over 3 months.

Sequential patterns show indeterminate or complex results for Germany, France, and Italy. All three cases demonstrate growth rates over 12 months near or over 20% and slip over 6 months only to rebound over 3 months to growth rates nearly as strong or at a stronger pace than they posted over 12 months. France is again the more unusual case as its growth rates are steady and accelerating with a 6-month fall back in growth that's minor in nature as growth is 18.5% over 6 months compared to 22.6% over 12 months and then advancing at a 32.1% annual rate over 3 months. Spain and the U.K., however, show clear decelerations in growth from 12-months to 6-months to 3-months with both posting double-digit declines over 3 months annualized.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 20 2023
EMU Export and Import Growth Sink as Trade Balance Waffles
Trade flows tell us that Europe is weak- The most striking feature about trade and the European Monetary Union as well as in the U.K. in April is the uniformity of weakness of exports and imports over three months and six months. The table displays data for the European Monetary Union aggregate for exports in manufacturing and nonmanufacturing, and for imports in manufacturing and nonmanufacturing. Total exports and imports are presented for France, Germany and the U.K. For other EMU members, Spain, Finland, Portugal, Belgium, and Italy, export data are presented. For all these countries and for the larger EMU economic unit, only Germany has positive export growth over three months and six months. France has positive export growth over three months and all the remaining entries have negative export growth - declining exports and declining imports (where shown)- on balance over three months and six months. The trade data are pointing to significant weakness in economic growth in Europe as of April. It is unusual for economic data to coalesce in such a striking and uniform picture.

Trade in EMU In the European Monetary Union, exports rise 1.1% over 12 months then fall by 10.4% over 6 months at annual rate and at a 10.5% annual rate over 3 months. Total imports register a similar but weaker profile with imports falling 9.5% over 12 months, at a 22.8% annual rate over 6 months and at a 15.4% annual rate over 3 months.

EMU manufacturing exports rise by 2.4% over 12 months, falling to a -12.5% annual rate over 6 months; they log a -8.5% annual rate over 3 months. Imports, by comparison, are slightly weaker over 12 months, falling by 0.7%, but then outperform exports by falling only a 10.7% annual rate over 6 months and at only a 3.4% annual rate over three months.

Nonmanufacturing trade shows exports lower by 4% over 12 months, flat over 6 months and falling at an 18.8% annual rate over three months. Imports, by comparison, are much weaker owing to the inclusion of energy where prices have been falling much faster. Imports fall at a 24.7% annual rate over 12 months, at a 42.6% annual rate over 6 months and at a 36.4% annual rate over 3 months.

Country data and trends The two largest economies in the EMU show weak trends although exports hold up better than imports. For Germany, exports rise 7.6% over 12 months, at a 1.7% annual rate over 6 months, and at a 0.8% annual rate over 3 months. These are positive growth rates over each horizon. But growth is steadily diminishing – a clear weakening pattern for German exports. For France, exports rise 9.5% over 12 months, then decline at a 6.5% annual rate over 6 months; they then recover to grow at a 0.7% annual rate over 3 months. The three-month growth rate interrupts the pattern of progressive deterioration, but there's a clear tendency to weaker growth across French exports. On the import side, both German and French exports show weakness; but only French imports show ongoing progressive weakness.

U.K. trends- The U.K., which is no longer a monetary union nor EU member, shows sharp declines in exports that nonetheless continue to rise 24.2% over 12 months. U.K. exports fall at a 14.6% annual rate over 6 months and fall at an outsized 54.9% annual rate over three months. U.K. imports fall 1.2% over 12 months and fall at 10.1% annual rate over 6 months, then slow their descent slightly with a 7.1% annual rate drop over 3 months.

Other EMU members- Next, we look at a group of countries of various sizes for Europe; all of these are European Monetary Union members. Finland, Spain, Portugal, Belgium, and Italy show declines in exports over 3 months and 6 months while most of them also show declines over 12 months with only Portugal and Italy being exceptions. Italy logs a 4.3% increase in exports over 12 months while Portugal eeks out a 0.2% increase.
by:Robert Brusca
|in:Economy in Brief
Japan| Jun 15 2023
Japan’s Trade Deficit Shrinks While Exports and Imports Both Contract
Japan's trade report posted sobering trends in May as Japan's deficit shrank from April, continuing a round of improvement as the trade deficit has improved in six of the last seven months.

Japan's trade flows tell a story of weakening global economic growth as well as of weakening growth in Japan. Japan's nominal export growth has declined over 12 months, 6 months, and 3 months. Imports also show declines over 12 months, 6 months, and 3 months. In neither case, is the nominal decline sequentially worsening, although in both cases the 6-month and 3-month pace of decline is at a greater rate than the 12-month decline.

Trade flows are contracting Real exports and real imports both fell in May, with exports falling by 4.6% and imports falling by 7.3%. Looking back at sequential trends of real exports, as for the nominal flows, there are declines over 12 months, over 6 months, and over 3 months. Once again, the declines over 3 months and 6 months are both greater than the pace of the decline over 12 months. This indicates a general deterioration in the pace of trade flow growth, but there is not a clear-cut monotonic decline in the growth rates. For imports, there are also negative growth rates over 12 months, over 6 months, and over 3 months. And - like for the nominal counterparts, and as in the case of exports as well - there's no clear-cut sequential trend deceleration in progress although over 6 months and 3 months the declines in growth rates are at a greater pace than the decline over 12 months.

Growth is slowing... These general trends indicate that global growth is weakening because Japanese export volumes are weakening. Import volume weakness suggests that Japan's domestic economy is weakening as well. Japan's nominal import declines show greater weakness than real declines because import prices are weakening faster, largely because of weakness in oil prices.

The yen is weakening In this environment, the yen has slipped against the dollar falling by 6.4% over 12 months, rebounding slightly to rise on balance over 6 months, then falling by 12.6% over 3 months. The real broad yen index, an index of the yen expressed in real terms and against a broad basket of currencies, mirrors the movement in the nominal yen against the dollar. This real, broad-based, measure is lower by 4.2% over 12 months, has a slight rebound over 6 months, then falls at a 6.9% annual rate over 3 months.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 14 2023
EMU Trends Erode with Considerable Volatility
Industrial output in the European Monetary Union grew by 1% in April with manufacturing shooting up by 3.7%. Hold the applause on this, however. Because this is a rebound from a larger 3.8% drop in March and a larger 5.8% drop in manufacturing output. While output overall and in manufacturing had gained in February, the 3-month change shows a decline in total EMU industrial production had a 5.8% annual rate over three months compared to manufacturing where there is a decline of 4.6% at an annual rate. The outsized increases posted in April do not reverse the trend weakness in industrial production or in manufacturing output in the European Monetary Union.

April: strong with isolated strength April's rebound, in fact, is wholly the result of strength in the capital goods sector where output surged by 14.7% after contracting by 15.2% in March. Consumer goods output fell by 2% in April, intermediate goods output fell by 1%. Both consumer goods and intermediate goods output have fallen for two months in a row. The strength that appears in April industrial production and in manufacturing output is wholly the result of a partial recovery in capital goods output.

Sequential rates of growth flag weakness Sequential rates of growth in overall output and in manufacturing output show progressive deterioration. For manufacturing, there's a 1.3% gain over 12 months, a 2.7% annual rate decline over 6 months, and a 4.6% annual rate decline over 3 months - that's a clear worsening pattern. Consumer goods output comes close to showing a deteriorating trend, but minor differences in the growth rates between 3-months and 6-months prevent that from occurring. Consumer durable goods output shows progressively smaller declines from 12-months to 6-months to 3-months. Nondurable goods output carries the day for progressive weakening trends. Intermediate goods also show diminishing sequential weakness as a 6.1% decline over 12 months becomes a 5.1% annual rate decline over 6 months and diminishes further to a 4.7% annual rate fall over 3 months. Interestingly and ironically, capital goods endorse the progressive deterioration trend with the 9.5% increase over 12 months, a weaker 0.3% annual rate decline over 6 months and a 3.7% annual rate decline over 3 months.

Country patterns Country patterns show broad output declines for manufacturing across 13 EMU countries reporting in April with eight showing declines in manufacturing (all of them, month-to-month declines of 1.8% or more). Country data also show 9 EMU members with output declining in March. March and April show much worse conditions than February when only 3 EMU countries showed month-to-month declines in output. Over 3 months eight European monetary union countries show output declines, seven countries show declines over 6 months, six countries show declines over 12 months. However, if we look at the median results for these countries, the median decline is 3.1% over 12 months that shrinks to a 1% decline at an annual rate over 6 months and then expands back to a 2.3% annual rate decline over 3 months, imposing no clear secular pattern, but showing persistent declines. However, over these three periods, as well as over the three most recent months, fewer than 50% of the reporting countries show output is accelerating when we evaluate it period-to-period. For example, output over 12 months is accelerating compared to 12-months ago in only 36% of the categories. That improves over 6 months as over 6 months 46% of the categories show output accelerating compared to its 12-month pace. However, over 3 months, only 36% of the categories show improved growth rates compared to what they log over 6 months.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 13 2023
ZEW Eco-situation Readings Ease While Expectations Merely Flounder
ZEW Overview The ZEW economic index weakened for the current situation in June, worsening for the euro area, for Germany, and for the USA. On the other hand, economic expectations improved slightly, but the emphasis here is on ‘slightly’ as economic expectations for Germany and the U.S. remain quite weak and depressed.

• Inflation expectations continued to post large net negative readings. Inflation rates continue to run high in the euro area, in Germany, and in the U.S. with a few ZEW experts thinking the conditions could worsen from where they are as central banks raise rates.

• Short-term rate expectations, on the other hand, are slightly weaker than they were in May. In the euro area, expectations have a ranking in their 86th percentile, reflecting the fact that the ECB is much farther behind raising rates relative to its inflation target. In the U.S., the short-term rate expectation index has only a 35.6 percentile ranking because the Federal Reserve has already raised rates substantially and there is, in the U.S., an ongoing to debate about whether the Fed is going to pause at the meeting this week, and then possibly continue to raise rates, whether it will raise rates at the meeting itself, or exactly where Federal Reserve policy stands. This uncertainty and ambivalence is reflected in this ZEW survey values.

• Long-term rate expectations are weaker in both Germany and the U.S.; both have fallen significantly in June compared to May acknowledging that inflation progress is detectable and that long-term interest rate investors may feel less at risk to what lies ahead.

• Stock market assessments of the euro area, Germany, and the U.S. all improved and all switched from a net negative reading in May to a net positive reading in June. But all the queue percentile standings remain extremely weak. The U.S. standing at nearly its 20th percentile is the strongest of the lot, a reading that itself is still quite weak.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 12 2023
Japan’s PPI Breaks Lower, Following the International Script
Japan's producer price index fell by 0.4% in May after turning up a flat performance in April and a flat performance in March. For all manufacturing, the PPI rose by 0.1% in May after rising by 0.2% in April and by 0.3% in March; the progression to smaller increases is in train month-to-month for manufacturing even if its broader progression is blunted.

PPI progression The progression from 12-months to 6-months to 3-months finds Japan’s PPI up at a 5.1% annual rate over 12 months and at a 0.5% annual rate over 6 months; then it falls at a 1.7% annual rate over 3 months. Japan's manufacturing PPI rises 4.5% over 12 months, then decelerates to a 2.4% annual rate over 6 months as well as over 3 months.
Global PPI disinflation is in gear...so what? Referencing the chart at the top, we can see that this tendency for the PPI to have run hot and then to decelerate sharply is part of an international phenomenon and one that seems to be strongly linked to energy prices (see the correlations to Brent in the table – not the CPI exception). The chart looks at year-over-year percent changes in various PPIs and plots them against the Brent price level that is chronicled on the left scale of a two-scale chart above. But it is not driving the trends central bankers care most about.

The PPI is NOT the index favored by central bankers For producer prices, raw materials, energy, commodities, agricultural goods - all these things - are extremely important. After energy prices had flared along with other commodity prices, they decelerated and this is having a global impact on producer prices; in fact, producer prices are falling much faster than consumer prices - the price indexes that central banks typically look at to set monetary policy.

Consumer prices rule! In the U.S., in Europe, and in the U.K., consumer price gains have long been too high, and they have continued to be stubborn, resistant to slowing enough in the face of these severe drops in producer prices. Markets, to some extent, are confused because, in the past, producer prices have been reasonable harbingers of consumer prices, but we also know that producer prices yield exaggerations of the moves to come from consumer prices. Even in Japan, consumer prices now are failing to show the kind of slowing outside of energy and food prices that the central bank had been expecting. Japan's inflation ‘problem’ is not as bad as the rest of the world. But Japan’s consumer prices are overshooting the Bank of Japan target. The BOJ has been arguing that the rise in inflation is temporary; the central bank has, for the most part, been ignoring it. But maybe now there's something percolating in the price index that Japan is going to have to pay some attention to. Japan may be in the process of becoming less of an exception.

Brent is still an inflation moderator The table still shows that energy is a negative factor, as Brent prices decline 11.5% month-to-month in May after having increased 2.7% in April and fallen 4.8% in March. There is no pent-up pressure coming from oil prices according to Brent. Sequentially Brent price changes are also still negative.

Global trends compared and contrasted Japan gives us the first inflation observation from May; for other countries we're looking at data up-to-date through April: for the European Monetary Union and for the U.S. and in comparison with Japan's own CPI. We can look at the sequential price trends and there we see U.S. and European PPIs showing decelerations from 12-months to 6-months to 3-months. Japan's CPI also shows decelerations from 12-months to 6-months to 3-months. But Japan’s CPI core shows an acceleration from 12-months to 6-months to 3-months. For comparison, I also reoffer Japan’s PPI on a one-month lag basis so we can compare it to the other indexes on the same, albeit less topical, timeline. On that basis, Japan's overall PPI still shows steady deceleration, but the manufacturing gauge shows the deceleration from 12-months to 6-months and then from 6-months to 3-months a very slight pickup: from 3.3% at an annual rate over 6 months to 3.5% at an annualized rate over 3 months. As far as comparisons go, it is hair splitting to call that ‘acceleration.’
by:Robert Brusca
|in:Economy in Brief