Service-Sector PMI Spread Narrowed in December But U.S. Retained a Large Composite Advantage

January 5, 2012

The U.S. Minus Euroland service sector purchasing manager differential fell to a four-month low of +3.8 points.  Such had crested at 6.5 points in October.  As in the case of manufacturing, the U.S. index was above 50, signifying a positive trend in activity but at a less rapid pace than in October or November.  In contrast, the euro area’s PMI-services index was below 50, indicating a lessening pace of contraction.  The sum of the manufacturing and service-sector spreads, shown in the right-most column below, was 10.8 points in both November and December following a reading of 10.2 points in October.  This sum favors the U.S. economy by 13.3 points more than in May 2011.  Over that seven-month span, the U.S. services index dropped just 2.0 points, while its euro zone counterpart fell 7.2 points.  In manufacturing, the U.S. score in December was 0.4 points higher in December than May despite a stronger dollar now than then, while Euroland’s manufacturing gauge fell by 7.7 points despite a weaker, and presumably more competitive, euro.

Improvement last month in the U.S. index was led by a 0.5-point rise of the jobs component.  Sales growth neither accelerated nor decelerated.  There was less inflation.  Euroland’s 1.3-point rise in the services PMI featured gains in Spain, Germany and France of 5.3, 2.1, and 2.0 points, while masking declines of 4.3 points in Ireland and 1.3 points in Italy.  The Italian and Spanish indices (45.8 and 42.1) reflected marked downturns of activity.  Irish service sector activity also contracted, as it’s PMI swung from above to below 50, and France’s index of 50.3 connoted a stalled sector.  Only Germany (with a score of 52.4) could boast more than marginal growth.  But all is not well in Germany, either.  That economy’s construction-sector PMI was below 50 in each month of the fourth quarter, with the greatest pace of contraction in new orders since February 2010 and the weakest jobs component since March 2011.

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
October 52.9 46.4 +6.5 50.8 47.1 +3.7 +10.2
November 52.0 47.5 +4.5 52.7 46.4 +6.3 +10.8
December 52.6 48.8 +3.8 53.9 46.9 +7.0 +10.8

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

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