Factory PMI Comparison: Further Relative Improvement of U.S. Versus Euroland

March 2, 2009

Manufacturing purchasing manager indices had sub-50 readings in both the United States and Euroland last month, connoting the obvious fact of significantly contracting activity on both sides of the Atlantic.  However, a comparison of the second derivatives, which tells if the rate of decline is intensifying or slowing, revealed relative improvement in the United States vis-a-vis Euroland for the third time in four months.  This can be observed below in the table labeled “spread,” which calculates the difference between the U.S. and euro area readings.  February had the most U.S.-advantageous spread in at least a year.  The spread between the new orders sub-indices improved to +4.9 points from +4.2 points in January.  These dual reports favor the dollar.  So far, a strengthening dollar on a risk aversion play has not engendered a deterioration of U.S. manufacturing relative to Europe.  Even if the spread had moved in Europe’s comparative favor, the dollar would still be likely to advance, because markets are not paying attention to economic fundamentals.

 

Mf’g PMI’s United States Euroland Spread EUR/USD
Feb 2008 48.8 52.3 -3.5 1.475
March 49.0 52.0 -3.0 1.553
April 48.6 50.7 -2.1 1.574
May 49.3 50.6 -1.3 1.555
June 49.5 49.2 +0.3 1.557
July 49.5 47.4 +2.1 1.577
August 49.3 47.6 +1.7 1.497
September 43.4 45.0 -1.6 1.437
October 38.7 41.1 -2.4 1.331
November 36.6 35.6 +1.0 1.268
December 32.9 33.9 -1.0 1.351
Jan 2009 35.6 34.4 +1.2 1.326
Feb 2009 35.8 33.5 +2.3 1.303

 

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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