U.S. Minus Euroland PMI-Mf’g Spread Nearly Doubled

February 1, 2010

Although the pace of manufacturing activity accelerated in January in both Euroland and the United States and outperformed expectations in each case, the improvement was considerably more dramatic in the United States and resulted in a near doubling of the PMI spread to 6.0 points in January.  The U.S. reading of 58.4 constituted a 65-month high, whereas Euroland’s 52.4 score was at only a two-year peak.  Activity in the U.S. was much livelier than in Euroland’s weakest links such as Spain (45.3), Ireland (48.1) and Greece (48.6) and even more robust than in France (55.4), the Netherlands (54.8), Germany (53.7) or Italy (51.7).  The production and new orders elements of the U.S. report were both above 65.0, and jobs jumped 3.1 points to a reading of 53.3 in an auspicious portent that Friday’s U.S. employment report may show an increase in jobs for the second time in three months.

U.S. manufacturing is still benefiting from a boost to competitiveness when the dollar sagged from 1.268 per dollar on average in November 2008 to a 1.491 on average a year later.  However, 37% of that depreciation got reversed in the ensuing two months, and the greenback opened in February more than 1% additionally softer than its January mean value.  A continuing dollar recovery points to narrower PMI-Mf’g spreads later this year.

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 35.7 33.5 +2.2 1.303
March 36.4 33.9 +2.5 1.306
April 40.4 36.8 +3.2 1.318
May 43.2 40.7 +2.5 1.365
June 45.3 42.6 +2.7 1.401
July 49.1 46.3 +2.8 1.409
August 52.8 48.2 +4.6 1.426
September 52.4 49.3 +3.1 1.455
October 55.2 50.7 +4.5 1.489
November 53.7 51.2 +2.5 1.491
December 54.9 51.6 +3.3 1.459
Jan 2010 58.4 52.4 +6.0 1.409

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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