Economy in Brief: July 2023

The year-on-year trend depicted in the chart on Finland’s IP growth shows an erratic recovery. Finland’s IP nose-dived during Covid as IP did across the world. It similarly staged a strong post-Covid recovery. But after seeing growth peak early in 2022, the pace of output expansion has slowed steadily and even seen year-on-year results flash between logging expansion and contraction in recent months.

In May output logs a 2.5% month-to-month gain after falling by 2.1% in April and rising 2.8% in March. But on the back of this monthly chop and year-on-year erratic behavior, the sequential growth rates are looking very solid, showing year-on-year output up by 1.2%, a gain at an 8.1% pace over 6 months then up to a 13.3% annual rate pace over 3 months. Still, IP excluding construction is only up at a 0.6% annual rate two months into Q2 2023. Manufacturing output is falling at a 1% annual rate in the unfolding second quarter as well - a complicating offset to sequential strength.

Utilities output is accelerating and exploding sequentially culminating in a 97.7% annual rate of increase over 3 months. But mining & quarrying output is tanking – not in a clear decelerating profile - but still falling at a 65.7% annual rate over 3 months.

Manufacturing shows sequential acceleration with output up 0.7% over 12 months, at a 3.6% pace over 6 months and at a 9.8% pace over 3 months. Still, both food-output and textile-output show weak performance.

Finland’s HIPC gauge is in a clear decelerating pattern in what is a now also common global pattern. While it is joined by deceleration in the core HICP as well, the core pace is much more stubborn with the pace slowing to only a 4.2% annual rate over 3 months. The performance of the HICP headline and core also are quite different in each of the last three months.

German IP fell by 0.2% in May as manufacturing IP rose by 0.2%. Manufacturing and headline IP both show sequential deterioration in play for their annualized rates of growth from 12-months to 6-months to 3-months. Consumer goods and capital goods output both show secular growth rate deterioration while intermediate goods show only a very minor deviation from that same pattern.

Real manufacturing orders and real sales both show more complex patterns.

The IFO headline for manufacturing and the gauge for expectations both show secular improvement from 12-months to 6-months to 3-months. The ZEW current index shows persistent negative readings, but they show progressive improvement. The EU Commission industrial index shows secular deterioration.

Other early European reporters show different results. France and Spain show ongoing sequential improvement in their output trends for IP. Portugal and Norway show sequential deterioration while Sweden shows a mixed pattern.

There are 17 quarter-to-date calculations in the table. Ten of them show negative growth in progress. Overall, German IP, manufacturing IP and real German orders log negative readings for the quarter to date. The ZEW current treading, as well as France and Sweden, log positive readings along with two key German sectors: capital goods and consumer goods.

Nine of 17 queue rankings show standings below their respective 50 percentile, a level that marks the median value for each series. The weakest percentile standings are for the intermediate goods sector for German manufacturing, the two IFO series (that are more upbeat- but from this lower ranking position) and IP in Portugal.

Twelve of 17 measures show weaker conditions in May 2023 that existed in January 2020 before Covid struck.