U.S. Minus Ezone PMI-Mf’g Spread Halved
December 1, 2009
Two-thirds of October’s rise in the U.S. manufacturing PMI was reversed last month, whereas the euro zone counterpart gauge got revised upward to 51.2 from 51.0 reported initially last week. That compared favorably to a 50.7 reading in October. The U.S. outcome was over a point lower than forecast. Euroland’s result was near expectations. As a result, the differential between the two indices was slashed from 5.0 points in October, which was more than a two-year high, to 2.4 points in November, its narrowest width since a spread of 2.2 points in June. The band’s width had printed between 2.1 and 2.4 points in three of the four months from February through June.
February marked the weakest juncture for Euroland manufacturing when activity was contracting at its sharpest pace, and U.S. industry that month was dropping only slightly less rapidly than in December when its PMI index hit bottom. The euro on average was 14.4% more expensive against the dollar in November than in February. However, manufacturers are seemingly coping well with any resulting erosion of competitiveness. In the nine months between February and November, Euroland’s PMI recovered 17.7 points from 33.5 to 51.2. That increase nearly matches the 17.8 point advance of the U.S. PMI manufacturing index from 35.8 to 53.6. These data explain why the ECB has been fairly sanguine about currency market developments and has not dropped clues about the possible invocation of forex intervention. A strong euro isn’t preventing recovery, and it helps contain inflation and thereby allow the central bank to wait longer before beginning to lift interest rates.
| Mf’g PMI’s | U.S. | 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 |
| February | 35.8 | 33.5 | +2.3 | 1.303 |
| March | 36.3 | 33.9 | +2.4 | 1.306 |
| April | 40.1 | 36.8 | +3.3 | 1.318 |
| May | 42.8 | 40.7 | +2.1 | 1.365 |
| June | 44.8 | 42.6 | +2.2 | 1.401 |
| July | 48.9 | 46.3 | +2.6 | 1.409 |
| August | 52.9 | 48.2 | +4.7 | 1.426 |
| September | 52.6 | 49.3 | +3.3 | 1.455 |
| October | 55.7 | 50.7 | +5.0 | 1.489 |
| November | 53.6 | 51.2 | +2.4 | 1.491 |
Copyright Larry Greenberg 2009. All rights reserved. No secondary distribution without express permission.
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