U.S Advantage Versus Euro Area in Manufacturing Widened Last Month
August 3, 2009
Factory sector downtrends continued to decelerate in the United States and Euroland in July, according to purchasing manager surveys released today. Production and orders expanded slightly in the United States and eased only marginally in Euroland. Labor market trends lagged in both regions as one might imagine, exerting a drag on each overall PMI index. The United States has enjoyed an advantage over Euroland in every month so far this year, contrasting with the situation late in 2008 when Euroland had the advantage in three of the year’s final four months. Such a shift is consistent with a strengthening euro, and thus eroding Euroland competitiveness. The euro averaged $1.268 last November and rose to $1.409 last month and $1.439 at present. Perhaps this is splitting hairs, since the spread between the two sets of PMIs — that is, the U.S. index minus the euro area index — has fluctuated narrowly between +2.1 and +2.6 in five of the past six reported months. But comparisons of the more inclusive GDP data reveal a more definitive advantage for the United States. In the year to 1Q09, real GDP fell 4.9% in Euroland compared to 3.3% in the United States. Euroland’s rate of contraction was greater than America’s both in the fourth quarter of 2008 and the first quarter of 2009. Last week’s U.S. GDP figures for the second quarter revealed a smaller-than-expected 1.0% contraction of GDP. Euroland GDP has not yet been released for 2Q but probably fell at least 3.5 times as quickly as did U.S. GDP.
| 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 |
| May 2009 | 42.8 | 40.7 | +2.1 | 1.365 |
| Jun 2009 | 44.8 | 42.6 | +2.2 | 1.401 |
| Jul 2009 | 48.9 | 46.3 | +2.6 | 1.409 |
Copyright Larry Greenberg 2009. All rights reserved. No secondary distribution without express permission.
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