PMI Comparisons: Significant U.S. Versus Euroland Advantage Maintained

February 3, 2012

The differential between the U.S. and euro zone purchasing manager service-sector indices widened by 1.4 points last month, more than offsetting an 0.9-point narrowing of the advantage in manufacturing and producing a hefty 10.9-point spread (shown in the right-most column below) for the third time in the past four months. 

The U.S. overall services index improved 3.8 points in January to signal the strongest rate of expansion since February 2011.  The components for sales, orders, and jobs jumped respectively by 3.6, 4.8, and 7.6 points, and the level of each was greater than 57.  Price pressures also intensified last month.

Euroland’s service sector PMI rose above 50 to 50.4, signaling a return to marginally positive growth in January.  Results were polarized, with Germany and France at 53.7 and 52.3 and thus indicating positive service sector growth.  In contrast, Ireland (48.3), Spain (46.1), and Italy (44.8) saw activity continue to contract.

PMIs U.S. Ezone   U.S. Ezone   Sum of
  Services Services Spread Mf’g Mf’g Spread Spreads
Jan 2011 58.3 55.9 +2.4 59.9 57.3 +2.6 +5.0
Feb 59.0 56.8 +2.2 59.8 59.0 +0.8 +3.0
March 56.3 57.2 -0.9 59.7 57.5 +2.2 +1.3
April 54.4 56.7 -2.0 59.7 58.0 +1.7 -0.3
May 54.5 56.0 -1.5 54.2 54.6 -0.4 -1.9
June 53.3 53.7 -0.4 55.8 52.0 +3.8 +3.4
July 53.4 51.6 +1.8 51.4 50.4 +1.0 +2.8
August 53.8 51.5 +2.3 52.5 49.0 +3.5 +5.8
Sept 52.6 48.8 +3.8 52.5 48.5 +4.0 +7.8
October 52.6 46.4 +6.2 51.8 47.1 +4.7 +10.9
November 52.6 47.5 +5.1 52.2 46.4 +5.8 +10.9
December 53.0 48.8 +4.2 53.1 46.9 +6.2 +10.4
Jan 2012 56.8 50.4 +5.6 54.1 48.8 +5.3 +10.9

A much better than assumed U.S. economy at the start of 2012 was also reflected in January labor statistics, which were truly spectacular compared to what investors have been seeing for years.  Employment grew by 243K, about 100K more than assumed, and December and November figures got revised higher.  Jobs as a result grew 201K per month between October and January, compared to 157K per month in the prior three months, 133K per month in the three months to last October and 78K per month in the three months before that.  America’s jobless rate fell to 8.3% from 9.1% as recently as September, and the broadest measure of un- and underemployment of 15.1% was a full percentage point lower than a year earlier.  Good weather may have been a factor in the upside surprise of these data.

The third meaningful U.S. indicator of the morning, a 1.1% rise in factory orders, was not quite as strong as predicted, but the prior month of November was revised up to show a gain of 2.2% such that the level of factory orders at the end of 2011 was around expectations.

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

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