April Purchasing Manager Survey Results: United States Versus Euro Area

May 2, 2011

The U.S. minus Euroland PMI spread narrowed to +2.4 points in April from 3.7 points in March.  The spread’s width has lately been pretty trendless, although oscillating to a fair degree.  Its  width changed direction in each of the past six months.  It also was +2.4 points in February and averaged +2.7 from October through March.  These are diffusion indices in which territory above 50 connotes expanding activity and below 50 implies contraction.  The further away from 50, the faster the rate of expansion or contraction.  Readings of 55 or better reveal brisk activity, and those of more than 60 show considerable dynamism.  The U.S. PMI has been above 50 since August 2009, above 55 since January 2010 and above 60.0 in each month so far of 2011.  April had not been forecast to exceed 60, but analysts were correct in anticipating a lower reading than for March.  Euroland’s PMI moved above 50.0 in October 2009 and has been greater than 55.0 in 12 of the last 14 months including a record high of 59.0 in February 2011 followed by 57.5 in March and 58.0 in March.

The U.S. production sub-index tumbled 5.2 points to 63.8 in April.  New business dropped 1.6 points, but a dip of only 0.3 points in jobs augurs well for solid labor market report due Friday.  Price pressures remained elevated in April both in the United States and Euroland.  In the euro area, unlike America, the pace of production growth quickened last month.  What sets Europe apart is the continuing and indeed widening disparity between core economies like Germany with a reading of 62.0 in April, France (57.4) and The Netherlands (59.2) on the one hand struggling peripherals on the other like Greece (46.8) and Spain (50.6).  In the middle is Italy with reading of 55.5 in April.

Manufacturing has not swung as much in America’s favor as one might have expected given the dollar’s depreciation.  The euro bottomed on June 7, 2010 at $1.1878 and averaged only $1.2202 that month.  On the final day of April, the euro touched a high of $1.4881, 25.3% stronger than last June’s low, and the average value of the euro all last month of $1.4552 was 19.3% above last June’s monthly mean.  For an interval of ten months, those movements represent a very significant change in price competitiveness.

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 57.1 54.2 +2.9 1.368
March 60.4 56.6 +3.8 1.356
April 59.6 57.6 +2.0 1.342
May 57.8 55.8 +2.0 1.255
June 55.3 55.6 -0.3 1.220
July 55.1 56.7 -1.6 1.278
August 55.2 55.1 +0.1 1.288
September 55.3 53.7 -0.4 1.308
October 56.9 54.6 +2.3 1.389
November 58.2 55.3 +2.9 1.368
December 58.5 57.1 +1.4 1.323
Jan 2011 60.8 57.3 +3.5 1.337
February 61.4 59.0 +2.4 1.365
March 61.2 57.5 +3.7 1.400
April 60.4 58.0 +2.4 1.445

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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