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| Feb 28 2023
Japan’s Industrial Struggles Intensify
Japan's industrial sector sputters and declines looking like a car that is running out of gas in January. January output fell by 4.3%, that is a sharp drop, after being flat in December and rising 0.7% in November. Progressive growth rates show that output growth is declining and decelerating. Japanese output is down by 3.2% over 12 months, falling at a 10.6% annual rate over six months, and then falling at a 13.5% annual rate over three months.

Manufacturing- This weak result is driven by manufacturing which saw output fall by 4.6% in January and where the sequential growth rates for overall manufacturing mirrors the path for industrial production and is getting progressively weaker as well.

Sector performance- Sector growth rates in Japan for consumer goods, intermediate goods, and investment goods show output on the decline and clearly decelerating across all of these categories. In January, output falls in all three sectors as it dropped 3% for consumer goods, 5.2% for immediate goods, and 4% for investment goods. Consumer goods output is holding up better than output in other sectors; still, the increase in output is just 3% over 12 months, it's up at a 1.1% annual rate over six months and it's dead flat over three months. Intermediate goods output falls 7.5% over 12 months, drops at a 14% annual rate over six months and declines at a 21.5% annual rate over three months. Investment goods output falls 1.1% over 12 months, then falls at a 20.3% annual rate over six months, and at a stunning plunge at 35.7% annual rate over three months. Manufacturing in Japan is unequivocally weak and output is unequivocally declining and it's declining in all sectors and it's declining on all tenors.

Two industries- Two industries saw increases in output in January. Mining output increased 1.3% and electric & gas output increased by 0.2%. Mining still shows sequential weakness with output down 6.2% over 12 months, followed by a 6.4% annual rate decline over six months, then accelerating to a 12.5% annualized rate decline over three months. Electric & gas output falls 4.2% over 12 months, accelerates to a 9.6% annualized rate decline over six months, but then logs an 8.1% annualized increase over three months, largely on the back of a one-month rise in December.

QTD Output is falling on a quarter-to-date (QTD) basis early in the first quarter. These calculations take output in January and gauge its annualized growth rate centering the calculation’s base on the average for the fourth quarter while compounding the growth rate. Early in the first quarter, output is falling at a 22% annual rate with manufacturing output falling at a 23% annual rate. Consumer goods output is falling at about a 10% annual rate, with intermediate and investment goods output each falling at a rate of 30% or faster. The decline in output in the first quarter is deep and broad.
by:Robert Brusca
|in:Economy in Brief
Europe| Feb 27 2023
EU Commission Index Shows Little Change in EMU in February
In February, the EU index for overall activity in the European Monetary Union ticked slightly lower to 99.7 from 99.8 in January. While there is little-change month-to-month, it shows that the improvement is holding up since December had a value of 97.1 and November, a value of 95.1. EMU economic assessments are moving higher, but in January and February gains are consolidating.

Sector stories The industrial confidence measure registered plus-one in both February and January, compared to readings of minus-one in both December and November. Consumer confidence improved in February moving to -19 from -20.7 in January, reflecting improvements from both December and November levels. The retailing assessment at zero in February, improves from -1 in January, -3 in December, and -6 in November - a clear ongoing trend of improvement for retailing. The construction sector is more waffling. Its February reading of +2 is above the January reading of +1, but that's below the readings for both December and November. Construction has remained relatively stronger than the other sectors; however, it is not advancing now. The services sector at +10 in February is at the same level as it was in January, but it's up from an assessment of +8 in December and of +4 in November.

Sector summary On balance, the sector readings in the European Monetary Union are stable or higher; construction is a minor exception. However, these are not high readings. The overall European Monetary Union index has a standing in its 47.9 percentile (below 50 and therefore) below its historic median level. Consumer confidence sits at an extremely weak 9.1 percentile reading, in the lower 10 percentile of its historic queue of values. The industrial sector has a 73-percentile standing; it's in the top 30% of historic readings; services have a 62-percentile reading, just inside the top 40% of readings but the sector is above its median and that's still a positive situation. Retailing and construction have the two strongest readings: retailing has a reading in its 82.9 percentile with construction in its 87.7 percentile; both are quite strong readings in historic comparison.

Since COVID... If we look at changes since the Covid situation developed, the overall index is lower by five points compared to January 2020 and all the sectors are lower compared to January 2020 except the industrial sector which is higher by six points. On balance, there has been little growth and for the most part weaker conditions over the last three years since COVID came to town.

Country-level conditions There are 18 early reporting European Monetary Union members reporting and among these 18 members all but 7 showed month-to-month improvement in February; all but two had shown improvement in January. These metrics of breadth reinforce the notion that conditions in the monetary union have been improving even if they're not strongly reflected in the aggregate data. Clearly, conditions are better in January and February, taken together, than they were in November and December, although there's scant improvement in February compared to January. That finding is echoed across the various industries as well as across countries. Country level data are, for the most part, still very weak among these 18 reporting countries. Only four have percentile standings above their medians - above a level of 50%. Among the big-four economies Germany has a rank standing as 37th percentile, France is at its 40th percentile, Spain is at its 41.6 percentile; only Italy, in its 62nd percentile, has a reading above its historic median. Among the weakest standings are Estonia at a 5.7 percentile standing, Slovakia at an 8.2 percentile standing, Belgium at a 14.9 percentile standing, and Finland at a 15.6 percentile standing.
by:Robert Brusca
|in:Economy in Brief
Germany| Feb 24 2023
Consumer Climate Experiences Global Warming in Germany; Can It Continue?
The GfK consumer climate index for Germany that projects climate from March has improved to a reading of -30.5 from -33.8 in February. This marks the 5th month in a row that climate in Germany has improved. So far, the steps are small, but they are persistent. Economic expectations, a survey that lags by a month, have four improving months in a row; income expectations, also on a one-month lag, have five improving months in a row. The propensity to buy, another lagging component, however, is only just improved in February from January whereas in January had deteriorated compared to December. Propensity to buy readings are hovering closer to their cycle lows although the cycle lows are nowhere near global lows for this series, as they are for climate and income expectations.

The context for this month: History- Despite the rather widespread and now nearly half-year trail of improvement, the path of improvement is a shallow one and the current readings for climate and most components remain stuck at historically low levels. Climate has been lower than its March reading only 2.7% of the time on data back to January 2002. Economic expectations fare the best of the lot, with a 48.4 percentile standing as of February, marking it is quite close to its historic median level (which would be marked by a 50-percentile standing). Income expectations have a very weak, 3.5 percentile standing; they are weaker only 3 ½% of the time. Consumers’ ‘propensity to buy’ is weaker than its February reading only 20% of the time. Climate alone has a March reading; the components have readings that are up to date as of February.

Elsewhere in Europe- In addition to the improvement in Germany, the U.K. logs an improvement (on data current through February). France posts a February setback but on readings that have been rather stable over the last five months. Italy's most recent reading is in January; it marks a decline to 100.9 from a level of 102.5 in December. But each of those two readings is still the strongest reading on Italian confidence since May 2022.
by:Robert Brusca
|in:Economy in Brief
Europe| Feb 23 2023
Year-on-Year EMU HICP Settles Lower But Pace Remains Hot
In January the HICP for the European Monetary Union rose 8.7% year-over-year, down from its 9.3% year-over-year gain in December. This is the mildest 12-month gain since it rose by 8.7% in June 2022; the pace was last lower in May 2022 rising 8.1% year-over-year. Similarly, the six-month inflation rate fell to 7.3% in January from 7.9% in December. This is its slowest pace since December 2021. The annualized three-month gain in the HICP is just at 3.2%. That is sharply lower than December's three-month rise at a 6% pace and it's the slowest pace since June 2021 (2.9%). But since the drop in the three-month pace from December to January is so sharp - just about having the pace from 6% to 3.2% - we should withhold judgement about the durability of this slower pace. For one thing, three-month growth rates are less reliable than the longer-term growth rates. Also, this is headline inflation and we have seen some increase in energy prices on global markets recently. The slowdown in the three-month pace may not be something you can take to the bank.

Somewhat mixed results: The inflation numbers for the month are at the same time encouraging and discouraging. Over five years the HICP average is rising at an average of 3.4%, which is well above the target rate of 2%; while the core rate, at 2.2%, is not very far from the target. This highlights the fact that much of the inflation has been in those components that are in the headline and not in the core. Food & energy prices have soared during this period. For much of the rest of the HICP, there has not been as much elevation although that's not to say the core prices are currently well behaved. They are not.
by:Robert Brusca
|in:Economy in Brief
Germany| Feb 22 2023
Germany’s IFO Gauge Improves Broadly...and Breadth Is Not Strength
Germany's IFO gauge for climate improved to -4.3 in February from -7.3 in January. The current all-sector index deteriorated slightly to 14.0 in February from 14.4 in January, but that deterioration was wholly because of a deterioration in the manufacturing sector; every other sector improved on the month. Expectations improved with the all-sector expectations index moving to -14.5 in February from -18.9 in January; there were improvements in all sectors, on the month. However, every single sector continues to have a net negative expectation reading. While there is some improvement and, while there is broad improvement, the IFO index only represents improvement from an extremely low level to a slightly less weak level. As an example, the all-sector expectations index has a queue standing at its lower 10th percentile; the all-sector current index has a standing in its 23rd percentile; and the overarching climate index has a standing in its 19th percentile. Any percentile standing below the 50-percentile mark is a standing below the median for that measure on data back to 2005.

On a shorter timeline comparing the February values to their respective levels back in January 2020 before COVID struck, we see declines for all of the measures except for manufacturing. That sector is slightly stronger on its climate, on its current, and on its expectations readings. For manufacturing, all of those changes are positive whereas for all of the other components all of those changes are negative. Since COVID struck, all sectors of the German economy have had a very difficult time getting back into gear.

The current-situation gauge shows rampant weakness with all sectors having queue rank standings below their 50th percentile except for construction. Construction has a 64.4 percentile standing; however, the retail sector is close to the 50-mark with a 49.5 percentile standing. The next closest is wholesaling, at a 40th percentile standing. Manufacturing, even though it has risen from its January 2020 level, still has only a 29.6 percentile standing. Services have only a 22.7 percentile standing. In terms of the current indexes, the assessments by participating in firms in the survey show continued weakness compared to historic performance.

The IFO expectations survey shows net negative readings up and down the line; all of them improved month-to-month. The queue rank standings for all of these are weak, below their 15th percentile for all industries except manufacturing that has a ‘whopping’ 19.4 percentile standing. The weakest sector response is from construction with a 3.7 percentile standing; services have an 8.3 percentile standing. Compared to January 2020, all of the readings are weaker except for manufacturing as noted above.
by:Robert Brusca
|in:Economy in Brief
Global| Feb 21 2023
PMIs Defy Logic... and Central Bank Tightening
The S&P flash (preliminary) PMIs show improvement across all early reporters in the table for the composite and for services. All composite indexes are above 50 showing expansion and all service sector readings are above 50 showing expansion in that sector as well. Manufacturing gauges improve month-to-month in the U.S. and the U.K., but they ease in Japan, the EMU, as well as in Germany and France separately. Manufacturing PMIs are still below 50 showing contraction everywhere.

A shift to strength- These results stand out starkly in the table that labels readings as stronger or weaker month-to-month. In January, only 4 of 18 readings were weaker month-to-month. In December, only four were weaker and three of those were readings for the U.S.

Sequential trend- Despite monthly evidence of the tide turning toward strength, over three months (a period calculated on hard data and ending in January) data show only 5 stronger readings over three months, four are stronger on balance over 6 months compared to 12-months and only two are stronger over 12 months compared to their levels of 12-months ago (both of those are for Japan).

Overall view of February- Flash standings data for February values show eight of eighteen readings above their median values on data back to January 2019. Manufacturing has a rank below 50 (below its median) for all countries and areas in the table. Services readings are below 50% only in the U.S. and Germany. Only the U.S. and Germany have composite standings below their respective 50% marks – but France is on the cusp….

Manufacturing- The U.S., France, and Japan have extremely low manufacturing sector queue standings in February with rankings below the 15th percentile. The EMU, Germany and the U.K. have standings around their 33rd percentile, at the border of the bottom third of their respective queue of responses.

Service sector- Only Japan has a strong service sector in relative terms with a 96th percentile standing, the U.K., France and the EMU have standings near the upper one third of their historic queues of data. Germany has a below-median 46th percentile standing; the U.S. has an even weaker 26th percentile standing.
by:Robert Brusca
|in:Economy in Brief
Canada| Feb 17 2023
Canada’s Industrial Inflation Backs-off
Canada's PPI in January fell by 0.5%, its second consecutive monthly drop, as it fell by 0.2% in December. Core prices fell by 0.3% in January after rising 0.5% in December. Of course, Canada trades closely with the United States; it shares the business cycle with the U.S. on most occasions, and there's a great deal of trade causing price developments between the two countries to tend to converge.

However, producer prices are showing slightly different trends right now between Canada and the U.S. The U.S. PPI that was recently announced accelerated in January and the U.S. core PPI accelerated as well. Canada's industrial prices have decelerated from 12-months to 6-months to 3-months and Canada's core industrial prices have fluctuated a little bit more, rising 3.6% over 12 months, accelerating to a 3.9% pace over 6 months then decelerating to a slower 2.6% annual rate over 3 months. U.S. headline PPI prices show some tendency to move lower, although the three-month inflation rate picks up compared to the 6-month inflation rate for the headline. The U.S. PPI core shows a considerable pickup in inflation over 3 months compared to 6 months. These features cause the U.S. pattern for prices to look different from the Canadian pattern.

Still, Canadian price inflation shows industrial prices up by 5.4% over 12 months with the core up only 3.6% over 12 months; that's a substantial difference. Core prices in Canada appear to be much better behaved; for gains over 12 months, 6 months and 3 months, the strongest gain over those horizons is the 3.9% gain over 6 months. The 3-month gain is down in a normal range rising at just a 2.6% pace.
by:Robert Brusca
|in:Economy in Brief
Japan| Feb 16 2023
Japan’s Trade Trends Show Weakening Flows on Both Sides as Deficit Stabilizes
In January, Japan's exports fell by 6.3% month-to-month as imports fell by 5.1%. Export and import trends in Japan show a sliding trend. Nominal exports are stronger by 4.2% over 12 months, but they're falling at a 15.3% annual rate over six months and at a 36.7 annual rate over three months. Imports are higher by 14.2% over 12 months, but over six months they're declining at a 17.4% annual rate and over three months they're falling at a 43% annual rate. Over 12 months imports are stronger than exports, but their annual rate of change is weaker than exports over six-month and three-month horizons.

Within the past year, the trends for the yen have shifted. Against the dollar, the yen is lower by 13.6% over 12 months; however, over six months the yen is rising at an 8.9% annual rate and over three months it's rising at a 38% annual rate. The broad trade weighted yen, gauged against multiple currencies, has fallen by 8.9% over 12 months; it's rising at an 8.3% annual rate over six months; it’s up at a 30% annual rate over three months. The yen's movements against the dollar alone are a little bit more extreme, but its movements against the dollar and other currencies are roughly in sync over these periods.

Export and import prices have been through a bit of a roller coaster; both export and import prices have fallen in each of the last three months and January export prices fell by 1.5% as import prices fell by 2.5%. Over 12 months export prices are higher by 9.2%, but they're falling at a 6.2% annual rate over six months and falling at a 20.5% annual rate over three months. For imports, prices are up 18.2% over 12 months, then fall at a 13.9% pace over six months, and fall at a 36.9% annual rate over three months.

Nominal export and import flows, adjusted for price changes to convert them to real terms, show that the trade picture changes slightly for exports, and more substantially for imports compared to nominal trends. Real exports fall by 4.6% over 12 months, fall at a 9.6% annual rate over six months and fall at a 20.4% annual rate over three months. Real imports fall by 3.4% over 12 months, by 4.1% over six months, and by 9.7% over three months.
by:Robert Brusca
|in:Economy in Brief
Europe| Feb 14 2023
EMU GDP Slows But Advances in Q4 2022
GDP in the European Monetary Union (EMU) settles in at a growth rate of 0.4% at an annual rate in the fourth quarter of 2022. This is a slowdown from the third quarter growth rate of 1.2% which itself was a slowed-down pace. GDP ends 2022 on a positive note with growth, but with a slowing trend. The fourth quarter growth rate for the monetary union slowed to 1.9% after reaching 2.3% in the third quarter, compared to 4.3% in the second quarter. The ranking of the year-over-year growth rate for the EMU (at 1.9%) is in its 56.5 percentile, leaving it slightly above its median result on data back to the fourth quarter of 1997.

Q4 GDP Seven members of the monetary union have provided estimates of GDP for the fourth quarter. They are Finland, France, Germany, Italy, the Netherlands, Portugal, and Spain. Among these reporters, Finland logs a decline in GDP in Q4 of 0.8% at an annual rate. Germany reports a decline of 1% at an annual rate; Italy reports a decline at 0.5% at an annual rate. Posting GDP increases in the fourth quarter are France, at a 0.5% annual rate, the Netherlands, at 2.5% at an annual rate, and Spain, at a 0.9% annual rate.

Q3 GDP In the third quarter, GDP declined in Finland and the Netherlands quarter-to-quarter while in the second quarter there had been no EMU country in the table reporting GDP declines quarter-to-quarter (U.S. GDP did decline).

Year-on-year GDP Looking at year-over-year results for Q4, all reporting countries have increases in GDP with France’s 0.5% the weakest gain followed by Finland's 0.6% gain. The strongest gain over four quarters is 3.3% for the Netherlands followed by Portugal's 3.1%. Note that outside the four largest economies, EMU GDP gains in Q4 for other members were 3.6%.

GDP trends Excepting the Netherlands, all countries report slower year-over-year growth in the fourth quarter than the third quarter and all countries reported slower growth in the third quarter compared to the second quarter. In the second quarter, all countries reported slower growth compared to the first quarter except for Spain. In broad terms, the European Monetary Union is showing a clear case of slowing growth. This is not surprising coming out of the recession and the initial boom in the wake of having dealt with COVID and the recovery from the impact of the pandemic.

The U.K. Elsewhere in Europe, the U.K. shows flat growth for the fourth quarter (Q/Q), an improvement from the decline that it had quarter-to-quarter in Q3 when GDP fell by 0.8%. The U.K. joins the rest of Europe showing decelerating year-on-year growth rates from the first quarter to the second to the third to the fourth. U.K. GDP growth in the fourth quarter of 2022 annualized is down to only 0.4% year-over-year.

Recovery favors the small... Recovery in the EMU has been stronger outside of the four largest economies. In the fourth quarter, the four largest economies grew 1.3% year-over-year compared to 1.9% for the EMU overall. In the third quarter, the four economies grew at a 2% pace while the EMU grew by 2.3%. In the second quarter, the four largest economies grew at a 3.9% pace compared to 4.3% overall for the whole of the monetary union and 5.7% for the EMU apart from the Big Four. In fact, while the four largest economies are slowing to 1.3% in the fourth quarter from 2.0% in the third quarter, the rest of EMU accelerates to 3.6% from 3.3%.

Rankings Rankings are for the period extending back to the fourth quarter of 1997. EMU shows a slightly better than median performance for its year-over-year growth rate in the fourth quarter at the 56.5 percentile, just slightly above its median marker at 50. Above-median growth appears for Italy, the Netherlands, and Portugal. Spain ranks just below its median at a growth standing of 48.9% while Finland, France, and Germany have very weak standings (of 29.3%, 16.3% and 40.2%, respectively).

Other rankings The U.K. has a growth standing in its 12th percentile. The U.S. is at its 14th percentile. Japan is at its 39.8 percentile. The EMU median ranking is at its 48.9 percentile and the four largest economies with growth pooled and GDP-weighted rank in their 41.3 percentile. It has been a tough row to hoe for the larger economies. Current performance is on a downswing with central banks hiking rates and some inflation metrics looking stubborn again after breaking lower for a short while. Policy and central banks face challenges ahead.
by:Robert Brusca
|in:Economy in Brief
Switzerland| Feb 13 2023
Swiss Inflation Reaccelerates
Swiss inflation rose by 0.9% in January after being dead flat in December. The rise in the HICP for Switzerland is the largest month-to-month rise in this cycle and the largest increase for quite some time, spurred by food, housing and energy prices. The same is true of the Swiss domestic CPI measure which rose by 0.7% in January after a 0.1% increase in December. Both the HICP and the Swiss CPI measures are rising at a 4% annualized rate over three months. Below I will focus on the CPI rate because its details are presented in the rest of the table.

The Swiss CPI is up by 3.3% over 12 months; it's up at a 2.5% annual rate over six months, showing some deceleration, and then, it accelerates sharply to 4% over three months. The core inflation rate, which rose by 0.4% in January after rising by 0.2% in both November and December, is up by 2.2% over 12 months; it's up at a 2% annual rate over six months and then it accelerates to a 3% annual rate over three months.

Switzerland presents a category of prices that is unusual among CPI reporters; it's a category of price changes excluding administered prices. That category shows prices rise by 0.5% in December after rising by 0.2% in December and 0.3% in November. The progression of prices in this category shows a 2.9% rise over 12 months, a slight deceleration to a 2.7% pace over six months and then acceleration to 4% over three months. Excluding administered prices doesn't have much impact on the rate acceleration, but it does reduce the level of year-over-year inflation compared to the headline but not compared to the core.

Among the eight categories in the table for Swiss consumer prices, there is consistent acceleration reported only for housing and energy where the prices are not seasonally adjusted. But in that category, prices rise by 5.1% over 12 months, at a 5.4% annual rate over six months and at a 7.3% annual rate over three months. Prices show deceleration on a consistent basis for health care with the inflation rate of minus 0.4%, deteriorating to minus 0.5% over both six months and three months when annualized.

Swiss inflation has accelerated recently and has a rate above 3% over 12 months and above 4% over three months, but when we measure the inflation performance on a compounded basis since January 2020 before COVID struck, the HICP inflation rate has only been rising at a 1.4% pace and the CPI has risen only at a 1.5% pace. In fact, most categories are quite well behaved with housing and energy showing a 2.7% inflation rate over that span. Transportation, another not-seasonally-adjusted category, shows inflation running at a 3.1% pace over the period. Apart from those, all the categories are showing inflation rates below 2% with health showing prices falling on balance, logging a -0.4% annual rate from January 2020.

At the bottom of the table, we reference the inflation rate for the European Monetary Union on its HICP measure. This measure is lagged because the data for January are not yet available. What we see is the substantial difference between inflation in Switzerland and in the European Monetary Union despite the union’s 2% goal. We see that over 12 months the EMU inflation rate has been at 9.2% instead of the 3.2% the Swiss posted. Over six months, EMU inflation is lower at a 7.1% pace, compared to a much lower 2.8% pace in Switzerland. Over the recent three months, the EMU pace is at 4.6% pace compared to 4.4% in Switzerland, a much closer comparison. These numbers are slightly out-of-sync because we are looking at the up-to-date European Monetary Union data which are lagged by a month against the Swiss data which are up to date through January. But they shouldn't be that dramatically different. What we do see is that EMU inflation over 12 months and six months has been quite substantially stronger than inflation has been in Switzerland. Even though Switzerland has been in a relatively high inflation environment, it has managed to keep its domestic inflation rate much more in check. And while it faces a minor inflation problem currently, there's no sense that it's particularly become entrenched. There is high inflation in two categories: (1) housing & energy inflation runs at a 7.3% annual rate over three months and (2) food & beverage inflation runs at a 6.1% inflation rate and that has been consistently elevated. It is increasing at a 5.6% pace over 12 months and a 6.7% annual rate over six months; the 3-month inflation rate of 6.1% is a step down. However, in the month of January food & beverage inflation exploded again, rising by 1.5% on the month. Still, overall Swiss inflation is remarkably well-behaved especially in a more global context.
by:Robert Brusca
|in:Economy in Brief
Europe| Feb 10 2023
Industrial Production Remains Weak in EMU; Shrinking Trend Continues
Industrial activity in the European Monetary Union advanced for the second month in the row, according to previously released manufacturing PMI data. The manufacturing industrial production reading for the entire euro area is not yet available; however, for 13-European Monetary Union member countries, the median increase in December was 0.2%; this follows a 1.6% median increase in November and a decline of 1.2% for the median in October. Clearly the industrial production situation weakened in December compared to November and the trend remains weak as well.

Among the thirteen early reporting members, six report declines in industrial production including a decline of 2.1% in Germany and a decline of 1.8% in Spain: two of the four largest European Monetary Union economies. France managed to eke out a manufacturing gain of 0.3% while Italy posted its second increase in a row, a rise of 1.7% for manufacturing industrial production in December.

These results compared to November when only two of these reporting countries showed declines and to October when 12 of 13 reporting countries showed declines with Greece as the exception logging an increase of only 0.2% in October for manufacturing output.

Sequential patterns Sequential growth patterns that track growth rates over 12 months, six months, and three months show the median gain over 12 months at a -0.8% annual rate, the median change over six months is at a -2.1% pace, and the median change over three months just at a -2% pace. The pattern falls just short of being a sequential deceleration, but it clearly is a weaking trend and a persisting contraction. Over these periods, we find only 27.3% of the reporters show manufacturing output accelerating over 12 months, 53.8% show output accelerating over six months compared to 12 months. Over three months, output accelerates in 45.5% of the reporters compared to their six-month pace. The year-on-year comparisons show output broadly decelerating - nearly universally- compared to growth rates of 12-month ago across countries. Over six months there are more accelerations than decelerations but by a small margin and over three months more decelerations than accelerations, also by a small margin.

Deceleration and Acceleration by country Austria, Germany, Spain, Luxembourg, and Ireland show declines in output on each of the three timelines. France, Italy, Malta, and Portugal show output increases on all three timelines. Output trends show persisting deceleration for Austria, Germany, France, Luxembourg, and Ireland. There is persisting sequential acceleration only in Portugal. Among non-EMU reporters in the table, Sweden and Norway show ongoing deceleration. Obviously, these results describe a great deal of weakness in train vs. a small minority of strength (Portugal!).

Quarter-to-date The quarter-to-date growth rates (QTD) show declines in five EMU members with output in one country unchanged. Output declines QTD occur in Italy, Netherlands, Spain, Luxembourg, and Greece; output is unchanged QTD in Germany. Non-EMU reporters in the table all show QTD output declines. On a QTD basis, weakness dominates strength; however, the median change on the quarter is a gain at a 0.1% annual rate of growth.

Weak growth since COVID struck Evaluating output trends since January 2020 - just before COVID came to town - we find the median net gain on this nearly 3-year period is 1%; about one third of one percentage point per year on average. It has been a period of ups and downs and weak growth overall. However, only Germany, France, Luxembourg, and Portugal log output declines on this timeline. But Germany, the largest economy in the euro area, logs a drop of 6.3%; that will drag the EMU result down considerably.
by:Robert Brusca
|in:Economy in Brief
Europe| Feb 09 2023
Inflation Cools, Flattens, in and across EMU...But Still Runs Strong
Month-to-month inflation moved higher in the EMU and across the EMU region on the month. But that masks the sharp slowing in three-month inflation that remains on the books for the EMU as a whole, for Germany, for France, and for Italy with Spain as the lone ‘large EMU economy’ exception. Even so, all four of the largest EMU economics and the EMU itself show inflation lower over three months (annualized, of course) than over 12 months. Comparing 12-month inflation to the 12-month pace of 12-months ago, inflation is still higher for the EMU, Germany, France, and Italy with Spain as the sole exception. In Spain, 12-month inflation is at 5.8% compared to a pace of 6.2% one year ago. However, comparing the 12-month inflation rate in January to the 12-month pace in December produces a mixed result with inflation lower in the EMU, Germany, and Italy, but higher in France and in Spain.

The Big picture In the big picture, the sequential trends (12-months to 6-months to 3-months) generally show inflation ratcheting lower but not necessarily monotonically. In Italy, inflation accelerates over six months before decelerating sharply over three months. In Spain, inflation decelerates over six months but then pops up over three months but still stays below its 12-month pace, keeping the general notion of deceleration intact.

Core inflation? Only Italy offers up some early core inflation. That result is not as encouraging, showing inflation higher over 12 months than it was a year ago. It shows 12-month inflation higher in January than in December and shows inflation accelerating from 12-months to 6-months to 3-months. Italy’s month-to-month inflation readings for core inflation show stubborn 0.5% increases in November and December capped by a 0.8% gain in January. The Italian core trend is a cautionary benchmark – it may not be generalizable, we don’t know.
by:Robert Brusca
|in:Economy in Brief