Economy in Brief: July 2026

Manufacturing output in the countries of the European Monetary Union continues to underperform. The median change for the 11 countries reporting on the table is a 0.5% decline in May following a 0.3% increase in April. However, only 41.7% of the reporters are accelerating in May, compared to 25% in April, although in March over half of the reporters had showed some acceleration, with output at 61.5%.

In May, of these eleven early reporters, seven showed month-to-month declines in output. This compares to four showing declines in April and four showing declines in March.

Sequential trends Over 12 months, output is declining in four of these eleven countries: Germany, Luxembourg, Ireland, and Portugal. Over six months, output declines in five of the eleven countries. Over three months, output declines in four of the eleven countries. Over these broader sequential periods, output is increasing in most cases; only one country, Ireland, shows consistent declines in output over three months, six months, and 12 months. However, among EMU countries, only Italy shows output expanding on all three timelines, although Sweden, an EU member country, also shows output increasing in all three periods.

Amid the output weakness in May, the quarter-to-date calculation for industrial production growth is also broadly weak. In May, seven of the eleven quarter-to-date changes in industrial production are negative. Positive results, increases in the quarter-to-date, are registered by Germany, Luxembourg, Greece, and Portugal.

The ranking of the year-over-year growth rates shows seven countries with output growth rate rankings below 50%, marking them as below their respective medians. The comparisons for output growth are taken back to 2006, a period of about 20 years.

Four EMU countries rank above their twenty-year medians: France, Italy, Luxembourg, and Greece.

The snapshot of industry in the monetary union is consistent, showing little momentum, little strength, and relatively low rankings for current growth rates; only a minority of reporters show an acceleration in growth in May compared to April. With the situation in the Strait of Hormuz deteriorating again, the outlook for industrial production has to remain guarded.

The German trade surplus surged in May to €19.1 billion from €14.7 billion in April. Exports rose by 0.9% in May while imports fell by 2.5%, creating a jump in the surplus month-to-month. In April, exports increased by 0.8% while imports rose by 1.1%.

Details on exports and imports lag by one month. In April, exports for motor vehicles and consumer goods declined, while exports of capital goods and other exports rose. On the import side, there were increases in imports ranging from 2.8% to 4.3% month-to-month across capital goods, motor vehicles, and consumer goods, but for the catch-all category ‘other’ imports fell by 2.7% month-to-month.

Flows adjusted for inflation showed an increase in exports of 0.4% in May while real imports fell by 3.3%. In April, real exports were flat while real imports fell by 0.2%.

The sequential behavior of real exports and real imports show independent activity. Imports log a clear weakening, rising 0.1% over 12 months, falling at a 5% annual rate over six months, and then falling at a 10.3% annual rate over three months. On the export side, real exports rose by 2.6% over 12 months, accelerated to a 7.2% annual rate over six months, but over three months have pulled back and fallen at a 1.6% annual rate. However, export growth still exceeds import growth over each of these horizons: 12 months, six months, and three months.

Trade trends paint a darkening picture of the German economy, with imports weak in real terms and trending even weaker, while activity on the export side of the equation pops over 12 months and six months but takes a hit over three months.

The Clash! The U.S.-Iranian clash in the Middle East resulted in a closure of the Strait of Hormuz that collapsed the economy watchers index in Japan earlier this year. However, as the war-like conditions settled down and the two sides have moved toward some kind of cease fire or a more permanent arrangement, in the wake of that comparative tranquility, the economy watchers index improved, and its future index improved more sharply. These comments applied to the data in the table and conditions up to the end of June.

New day dawning... However, the data in the table are unrelated to what has happened in the past two days, when Iran took potshots at a couple of ships in the Strait, causing the U.S. to retaliate and President Trump to declare that the ceasefire has now ended. The door remains open for some kind of talks; however, the president’s recent remarks carried in the newspapers has clearly stated that the ceasefire has ended, and the U.S. intends to hit Iran and has suggested that it intends to hit it ‘hard.’ At the same time, Mr. Trump has said the door remains open to continuing talk and negotiations if both sides still want to get together; however, he admits he is not optimistic.

Precarious times and conditions So, these are precarious conditions. Oil prices have already responded and moved higher. We have Japan’s economic data for June showing some revival in the current index and some sharply higher revivals over the last few months in the future index. However, when the dust clears the queue standings of the current and future indexes are revealed, they are pretty similar, with the current index at a standing of 29.6% and the future index of 31.6%. Both the current and future readings coalesce around a 30-percentile standing, marking the two segments of the survey as usually stronger about 70% of the time which marks the latest readings as relatively weak. And that is before we take the new realities of July into account.

The current IS the future... There isn't too much point in talking about the two parts of the survey separately. The current and future surveys are simply not that different. This month, the lowest percentile standing in the current subindexes is housing, at an 11.5 percentile standing, followed by employment at a 17.8 percentile standing. In the future index, housing has an 11.1 percentile standing and employment has an 18.6 percentile standing; these readings are also the two lowest rankings in the future survey.

Sequential improvement is only point-to-point Over three months, we can see the point-to-point changes in the current index and some improvements in all of the components except housing. In the future index, the three-month changes show point-to-point improvements in all of the components. However, both surveys show point-to-point declines over six months and broad point-to-point declines over 12 months as well. Looking at the changes based on smooth data (shown at the bottom of the table), for the three-month averages compared to six-month averages and six-month averages compared to 12-month averages, conditions show no improvement. We see no improvements in the current or future indexes over three months or six months, and no improvement in the future index in the 12-month average compared to 12-month average of 12 months ago—although 40% of the components in the current index are improved over 12 months compared to 12 months ago.