Manufacturing in the United States and Europe

May 4, 2009

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
Mar 2009 36.3 33.9 +2.4 1.306
Apr 2009 40.1 36.8 +3.3 1.318

 

Euroland’s manufacturing purchasing managers index rose 2.9 points in April and surpassed 24.9 for the first time in five months.  The comparable U.S. index improved by an even greater 4.8 points to 40.1, so the differential between the two data series widened for a fourth consecutive time to 3.3 points. The average value of EUR/USD last month was $1.318, similar to the mean in each month of the first quarter but over 16% weaker than in April 2008. A more competitive euro has not yet lent relative support to Euroland manufacturing that is readily discernible.  Any benefit has been eclipsed because Europe is more dependent on trade than is the United States and because the impact of weak global demand (also known as income effects on trade) have outweighed any substitution effects related to relative price changes induced by currency movement.  Also, the euro was still 14% stronger against the dollar last month than its mean value in 1999-2008.

The PMI scores are diffusion indicies, and values below 50 still indicate contracting activity.  The rate of contraction remained rapid in both the United States and Euroland.  PMI readings from Non-Euroland economies in Europe told a similar story of significant, but lessening rates of factory-sector contraction.  Britain’s index rose 3.4 points to 42.9.  Denmark’s improved 3.7 points to 33.8.  The Swiss and Swedish indices increased 2.4 points and 2.1 points to 38.8 and 34.7.  The Czech and Polish readings were 42.1 and 38.6, up 4.6 points and down a tenth.  The Russian index went up 1.4 points to 43.4.

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

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