Are the U.S. And Euro Area Economies Converging Again? PMI's Suggest So.

June 3, 2009

PMIs U.S. Ezone   U.S. Ezone   Sum of
  Services Services Spread Mf’g Mf’g Spread Spreads
Feb 2008 49.7 52.3 -2.6 48.8 52.3 -3.5 -6.1
March 49.9 51.6 -1.7 49.0 52.0 -3.0 -4.7
April 51.9 52.0 -0.1 48.6 50.7 -2.1 -2.2
May 51.2 50.6 +0.6 49.3 50.6 -1.3 -0.7
June 48.8 49.1 -0.3 49.5 49.2 +0.3 0.0
July 49.6 48.3 +1.3 49.5 47.4 +2.1 +3.4
August 50.4 48.5 +1.9 49.3 47.6 +2.1 +4.0
Sept 50.0 48.4 1.6 43.4 45.0 -1.6 0.0
October 44.6 45.8 -1.2 38.7 41.1 -2.4 -3.6
November 37.4 42.5 -5.1 36.6 35.6 +1.0 -4.1
December 40.1 42.1 -2.0 32.9 33.9 -1.0 -3.0
Jan 2009 42.9 42.2 +0.7 35.6 34.4 +1.2 +1.9
Feb 41.6 39.2 +2.4 35.8 33.5 +2.3 +4.7
March 40.8 40.9 -0.1 36.3 33.9 +2.4 +2.3
April 43.7 43.8 -0.1 40.1 36.8 +3.3 +3.2
May 44.0 44.8 -0.8 42.8 40.7 +2.1 +1.3

 

The United States and Euroland experienced very similar GDP growth in 4Q08, the first quarter after Lehman failed, of minus 6.3% and minus 6.2%, respectively, at a seasonally adjusted annual rate (saar).  But by 1Q09, the euro area was imploding clearly faster with an annualized negative growth rate of 9.8% versus minus 5.7% in the United States.  The two regional PMI scores seen above suggest a more recent trend back toward greater convergence, however.  The table columns marked spread are the first differences between U.S. and euro area PMI readings, and the right-most column simply adds the spread for service PMIs to the spread for factory-sector PMIs.  In May, Euroland saw a bigger point increase in services (+1.0 point versus +0.3 points in the U.S.) as well as a larger rise in manufacturing (+3.9 points compared against +2.7 points).  As a result, the U.S. advantage (denoted by a positive sign in the sum of spreads column) shrunk to just 1.3 points in May, the lowest since September, from 3.2 points in April and a recent high of 4.7 points in February.

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

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