Widest U.S. Minus Euroland Factory PMI Differential Since Before the Great Recession Seen in April

May 2, 2012

The U.S. manufacturing purchasing managers index increased by 1.4 points to a greater-than-expected 54.8 in April, which was also a 10-month peak.  Euroland’s comparable index, in comparison, fell 1.8 points to 45.9, causing the spread between the two measures to widen by 3.2 points to 8.9 points.  The spread increased 5.5 points in the two months from February to April.  Europe’s recession may not be flattening as ECB officials have claimed, and it looks doubtful that GDP in 2012 will lie within the negative 0.5% to positive 0.3% band that ECB staff currently is projecting.

The expansion of U.S. manufacturing activity remains solid and far removed from Euroland’s persisting recession.  U.S. production and new business respectively rose by 2.7 points and 3.7 points to 61.0 and 58.2.  Jobs growth improved 1.2 points.  Germany, France, Italy, Spain, Greece, and The Netherlands all had sub-50 readings, signifying that manufacturing activity in those economies was contracting last month.  Only the last country on that list had a reading of as much as 47.0, signifying a pretty deep recession.

Reflecting the divergence between the United States and euro area economies, the Dow Jones Industrial Average has risen 5.2% since the middle of 2011, while the German Dax has fallen by 9.8% over the same span.  The dollar has appreciated 10.3% against the euro.  Ten-year German bund yields have dropped by 138 basis points, but U.S. 10-year Treasuries have almost matched strides, dropping 123 basis points.  The biggest shift has occurred in short-term rates.  Three-month eurodollar deposit rates are 22 basis points higher now than in mid-2011, whereas three-month euribor rates have fallen by 91 bps.

Mfg PMIs U.S. Euroland Spread EUR/USD
Feb 2008 47.6 52.3 -4.7 1.475
March 48.3 52.0 -3.7 1.553
April 48.8 50.7 -1.9 1.574
May 49.8 50.6 -0.8 1.555
June 50.0 49.2 +0.8 1.557
July 49.2 47.4 +1.8 1.577
August 44.8 47.6 -2.8 1.497
September 44.8 45.0 -0.2 1.437
October 38.9 41.1 -2.2 1.331
November 36.5 35.6 +0.9 1.268
December 33.1 33.9 -0.8 1.351
Jan 2009 34.9 34.4 +0.5 1.326
February 35.6 33.5 +2.1 1.303
March 36.0 33.9 +2.1 1.306
April 39.8 36.8 +3.0 1.318
May 42.0 40.7 +1.3 1.365
June 45.8 42.6 +3.2 1.401
July 49.2 46.3 +2.9 1.409
August 53.5 48.2 +5.3 1.426
September 54.2 49.3 +4.9 1.455
October 53.9 50.7 +3.2 1.489
November 54.3 51.2 +3.1 1.491
December 55.8 51.6 +4.2 1.459
Jan 2010 56.7 52.4 +4.3 1.409
February 55.8 54.2 +3.6 1.368
March 59.3 56.6 +2.7 1.356
April 59.0 57.6 +1.4 1.342
May 58.8 55.8 +3.0 1.255
June 56.0 55.6 +0.4 1.220
July 55.7 56.7 -1.0 1.278
August 57.4 55.1 +2.3 1.288
September 56.4 53.7 +2.7 1.308
October 57.0 54.6 +2.4 1.389
November 58.0 55.3 +2.7 1.368
December 57.3 57.1 +0.2 1.323
Jan 2011 59.9 57.3 +2.6 1.337
February 59.8 59.0 +0.8 1.365
March 59.7 57.5 + 1.7 1.400
April 59.7 58.0 +1.7 1.445
May 54.2 54.6 -0.4 1.433
June 55.8 52.0 +3.8 1.438
July 51.4 50.4 +1.0 1.423
August 52.5 49.0 +3.5 1.435
September 52.5 48.5 +4.0 1.377
October 51.8 47.1 +4.7 1.371
November 52.2 46.4 +5.8 1.356
December 53.1 46.9 +6.2 1.316
January 54.1 48.8 +5.3 1.290
February 52.4 49.0 +3.4 1.323
March 53.4 47.7 +5.7 1.320
April 54.8 45.9 +8.9 1.315

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

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