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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