U.S. Enjoys Advantage over Euroland in Manufacturing for Now at Least
October 3, 2011
The U.S. purchasing managers index rose a whole point to 51.6 in September, averting a signal of contracting activity. The last sub-50 reading occurred in July 2009. Readings below 50.0 imply contraction. The component for production increased by 2.6 points to 51.6, while that for jobs rose 2.0 points to 53.8. Orders were unchanged at 49.6, indicating a small reduction in new business.
Euroland’s comparable PMI fell by a half point to 48.5. The first sub-50 reading in 23 months occurred in August. Holland (48.9), Italy (48.3), France (48.2), Ireland (47.3), Spain (43.7) and Greece (43.2) all reported sub-50 results, while Germany’s 50.3 score showed that even the biggest economy in the common currency area is in danger of succumbing to the pull of regional recession.
The spread between the U.S. and euro area manufacturing PMIs is very sensitive to the EUR/USD relationship. Over the past fifteen months, six lead changes have occurred in the PMI differential as shown below. The spread has occillated from minus 0.4 in September 2010 to +3.7 six months later in March 2011, then back to minus 1.1 in May, +3.3 in June, +0.5 in July and +3.1 last month. The euro averaged $1.3771 last month compared to a 2Q11 value of $1.4388. It is now 3.6% lower than its mean last month and 7.8% weaker than its 2Q mean, a movement that suggests the PMI spread will be narrowing in the future.
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 |
May | 53.5 | 54.6 | -1.1 | 1.433 |
June | 55.3 | 52.0 | +3.3 | 1.438 |
July | 50.9 | 50.4 | +0.5 | 1.423 |
August | 50.6 | 49.0 | +1.6 | 1.435 |
September | 51.6 | 48.5 | +3.1 | 1.377 |
Copyright 2011, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Manufacturing PMIs