Ezone PMI-Mf'g Below U.S. Counterpart for First Time in Over a Year
July 1, 2008
Euroland posted a PMI score in June of 49.2, down 1.4 from the reading in May and a full point less than the equivalent U.S. measure of 50.2. In May, the U.S. reading had been 1.0 points below the Euroland reading, and the spread (U.S. minus Ezone) ended 2007 at -4.2 points. A score above 50 is associated with expanding activity; 49.9 or less connotes a contraction. U.S. manufacturing was in the black for the first time in five months, whereas Euroland’s sub-50 reading was its lowest score in three years and a month. The differentials for production and new orders swung in the U.S. favor last month, but the jobs spread favoring Euroland widened to -6.0 from -5.6. The production spread was 1.9 in June compared to -0.7 in May, and the orders spread was 2.3 after 0.9.
Dollar depreciation boosts U.S. manufacturing more than service-producing industries. The table below documents the evolution of the differential between the U.S. and Euroland PMI scores in manufacturing since May 2007 and compares such to monthly average values in the euro. As it costs more dollars to obtain a single euro, Ezone competitiveness drops relative to U.S. competitiveness, assuming no change in any other factors affecting competitiveness.
| U.S. PMI | Ezone PMI | 1st Difference | EUR/USD | |
| May 2007 | 52.8 | 55.0 | -2.2 | $1.352 |
| June | 53.4 | 55.6 | -2.2 | $1.343 |
| July | 52.3 | 54.9 | -2.6 | $1.372 |
| August | 51.2 | 64.3 | -3.1 | $1.362 |
| September | 50.5 | 53.2 | -2.7 | $1.389 |
| October | 50.4 | 51.5 | -1.1 | $1.423 |
| November | 50.0 | 52.8 | -2.8 | $1.468 |
| December | 48.4 | 52.6 | -4.2 | $1.455 |
| Jan 2008 | 50.7 | 52.8 | -2.1 | $1.472 |
| February | 48.3 | 52.3 | -4.0 | $1.475 |
| March | 48.6 | 52.0 | -3.4 | $1.553 |
| April | 48.6 | 50.7 | -2.1 | $1.574 |
| May | 49.6 | 50.6 | -1.0 | $1.555 |
| June | 50.2 | 49.2 | +1.0 | $1.557 |
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