U.S. Activity Still Increasing as Ezone PMI Readings Drop Below 50

October 5, 2011

Economic conditions have deteriorated much faster in the euro area than the United States according to September purchasing manager survey results.  Readings above 50 imply expansion, while those below 50 signify contracting activity.  As scores move further from 50, the rate of change or second derivative becomes more pronounced.  A drop in the U.S. services PMI to 53.0 from 53.3 means that service-sector activity grew slightly more slowly last month but still at a decently positive rate.  Euroland’s comparable PMI swung from 51.5 to 48.8, meaning service sector activity switched from a low forward gear into reverse.  The 4.2-point differential between the U.S. and Ezone readings was the biggest advantage for the U.S. since 2008. 

The U.S. sales and new business components recorded brisk growth with readings in September of 57.1 and 56.5, respectively 1.5 and 3.7 points better than their August levels. Jobs, however, swung below 50, dropping by 2.9 points to 48.7, suggesting a weak labor department employment report this Friday.  In Europe, Germany’s PMI dipped under 50 to 49.7.  The Italian and Spanish readings of 45.8 and 44.8 showed significantly faster rates of declining activity, and the French PMI fell by 5.3 points to 51.5, signaling an abrupt slowdown of positive activity in the second largest economy using the euro.  Lessening inflationary pressure was evidenced in both Europe and the United States.

The right-most column below calculates the algebraic sum of the U.S. minus Ezone manufacturing and non-manufacturing spreads.  At +7.3 in September, such was 9.8 points more advantageous to the United States than the spread in May.  Indeed, the U.S. overall economic advantage versus the euro area was greater last month than any time since at least February 2009.

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 52.7 51.8 +0.9 57.1 54.2 +2.9 +3.8
March 54.1 54.1 0.0 60.4 56.6 +3.8 +3.8
April 54.6 55.6 -1.0 59.6 57.6 +2.0 +1.0
May 54.8 56.2 -1.4 57.8 55.8 +2.0 +0.6
June 53.5 55.5 -2.0 55.3 55.6 -0.3 -2.3
July 53.7 55.8 -2.1 55.1 56.7 -1.6 -3.7
August 52.8 55.9 -3.0 55.2 55.1 +0.1 -2.9
Sept 53.9 54.1 -0.2 55.3 53.7 -0.4 -0.6
October 54.6 53.3 +1.3 56.9 54.6 +2.3 +3.6
November 56.0 55.4 +0.6 54.2 55.3 +2.9 +3.5
December 57.1 54.2 +2.9 58.5 57.1 +1.4 +4.3
Jan 2011 59.4 55.9 +3.5 60.8 57.3 +3.5 +7.0
Feb 59.7 56.8 +2.9 61.4 59.0 +2.4 +5.3
March 57.3 57.2 +0.1 61.2 57.5 +3.7 +3.8
April 52.8 56.7 -3.9 60.4 58.0 +2.4 -1.5
May 54.6 56.0 -1.4 53.5 54.6 -1.1 -2.5
June 53.3 53.7 -0.4 55.3 52.0 +3.3 +2.9
July 52.7 51.6 +1.1 50.9 50.4 +0.5 +1.6
August 53.3 51.5 +1.8 50.6 49.0 +1.6 +3.4
Sept 53.0 48.8 +4.2 51.6 48.5 +3.1 +7.3

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

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