Europe Doing Better Relative to the United States

July 6, 2010

According to purchasing manager survey data, Euroland’s rate of expansion last month faltered by less the rate of U.S. expansion in non-manufacturing and manufacturing.  The algebraic sum of the two sets of PMI spreads, shown in the right-most column below, was minus 1.1, giving Euroland its best relative advantage since November.  The spread for services swung 3.0 points from +1.3 in March to -1.7 in June.  The spread in the case of manufacturing collapsed from 6.0 in January to just 0.6 in June.  All four June PMI readings — two each for the U.S. and euro zone — had higher averages in the second quarter than the first quarter, pointing to better GDP growth last quarter than in 1Q.  All of the 2Q averages were comfortably above 54.5, connoting decently positive growth in the spring, but all of the indices started to fade as mid-year approached, pointing to a loss of momentum heading past midyear.  In today’s U.S. report for non-manufacturing activity, production and orders declined by 3.0 and 2.7 points.  The overall U.S. index was 1.6 points lower in June than May.  Euroland’s two biggest economies, Germany and France, reported an unchanged services PMI and a drop of 0.6 points, by comparison.  Euroland’s vulnerable peripheral economies are considerably smaller in size than Germany or France, and at least Ireland and Spain showed some resilience with respective June service-sector readings of 55.4, up 3.0 points, and 51.8, down just 0.5 points.

PMIs U.S. Ezone   U.S. Ezone   Sum of
  Services Services Spread Mf’g Mf’g Spread Spreads
Feb 2009 42.1 39.2 +2.9 35.7 33.5 +2.2 +5.1
March 41.2 40.9 +0.3 36.4 33.9 +2.5 +2.8
April 43.9 43.8 +0.1 40.4 36.8 +3.6 +3.7
May 44.5 44.8 -0.3 43.2 40.7 +2.5 +2.2
June 46.3 44.7 +1.6 45.3 42.6 +2.7 +4.3
July 46.7 45.7 +1.0 49.1 46.3 +2.8 +3.8
August 48.2 49.9 -1.7 52.8 48.2 +4.6 +2.9
Sept 50.1 50.9 -0.8 52.4 49.3 +3.1 +2.3
October 50.1 52.6 -2.5 55.2 50.7 +4.5 +2.0
November 48.4 53.0 -4.6 53.7 51.2 +2.5 -2.1
December 49.8 53.6 -3.8 54.9 51.6 +3.3 -0.5
Jan 2010 50.5 52.5 -2.0 58.4 52.4 +6.0 +4.0
Feb 53.0 51.8 +1.2 56.5 54.2 +2.3 +3.5
March 55.4 54.1 +1.3 59.6 56.6 +3.0 +4.3
April 55.4 55.6 -0.2 60.4 57.6 +2.8 +2.6
May 55.4 56.2 -0.8 59.7 55.8 +3.9 +3.1
June 53.8 55.5 -1.7 56.2 55.6 +0.6 -1.1

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

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