U.S./Euro Area Manufacturing PMI Spread Shows Widest Advantage in Four Months

June 1, 2010

The purchasing manager indices fell in May by 1.8 points in Euroland but just 0.7 points in the United States.  The differential between those two readings increased 1.1 points as a result to its greatest width since January despite a near 20% appreciation of the dollar against the euro since November.  Manufacturing is export-intensive, so ordinarily such a shift in the exchange rate would favor manufacturing conditions in Europe in this instance.  It didn’t do that because the euro’s depreciation was caused by a frightening shock to the European economy accompanied by a drop in confidence in the region’s outlook.  The subindex for U.S. orders remained at a very strong 65.7, and production dipped just 0.3 points below April’s 66.9 reading.  Jobs rose by 1.3 points, while prices remained very high despite a half-point drop to 77.5.  The overall report was marginally better than forecast.  Euroland’s economy is evolving unevenly, with German punching in at a 58.4 PMI reading but Spain and Greece at 51.5 and 41.8.  A score of 50 separates expansion from contraction. 

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
February 56.5 54.2 +2.3 1.368
March 59.6 56.6 +3.0 1.356
April 60.4 57.6 +2.8 1.342
May 59.7 55.8 +3.9 1.255

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

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