U.S. Minus Ezone PMI Services Spread Not as Wide in October as in September

November 6, 2012

The United States experienced its third best monthly service-sector advantage in 2012 versus Euroland, eclipsed only by the differentials in September and February.  The U.S. purchasing managers index dropped 0.9 points to a 2-month low of 54.2 in October, while Euroland’s comparable measured edged down a tenth of a point to 46.0, a 39-month trough.  Readings above 50 imply expanding activity, and those below that no change threshold signify contraction.

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 +6.4 54.1 48.8 +5.3 +10.9
Feb 57.3 48.8 +8.5 52.4 49.0 +3.4 +11.9
March 56.0 49.2 +6.8 53.4 47.7 +5.7 +12.5
April 53.5 46.9 +6.6 54.8 45.9 +8.9 +15.5
May 53.7 46.7 +7.0 53.5 45.1 +8.4 +15.4
June 52.1 47.1 +5.0 49.7 45.1 +4.6 +9.6
July 52.6 47.9 +4.7 49.8 44.0 +5.8 +10.5
August 53.7 47.2 +6.5 49.6 45.1 +4.5 +11.0
Sept 55.1 46.1 +9.0 51.5 46.1 +5.4 +14.4
October 54.2 46.0 +8.2 51.7 45.4 +6.3 +14.5

 

The sales and orders components of the U.S. service-sector survey declined by 4.5 and 2.9 points to 55.4 and 54.6, but the jobs sub-index improved to 54.9 from a score of 51.1 in September.  An earlier release of the U.S. manufacturing PMI was above 50 for the second straight month following a string of three straight sub-50 readings. These results do not reflect the drag on fourth-quarter growth caused by Hurricane Sandy.  That hit will be followed by a boost in 2013 from the repair of damaged infrastructure.

The euro area’s service-sector purchasing managers index was depressed by France, whose PMI dropped to a 12-month low of 44.6.  Germany (48.4), Italy (46.0), and Spain (41.2) also registered sub-50 scores.  The only national index to lie in the 50s was Ireland with a reading of 56.1, which was up from 53.9 in September and at a five-year peak.  Euroland reports a composite PMI that, unlike the table above, weights the relative importance of manufacturing and non-manufacturing.  The composite PMI score in October of 45.7 was even lower than the 46.3 mean score in the third quarter.  It appears that GDP is likely to contract by 2% or more at an annualized rate in the final quarter of 2012.

The right-most column above displays the algebraic sum of the manufacturing and non-manufacturing PMI spreads.  At 14.5, the entry from October is a tenth of a point higher than in September and the most U.S.-advantageous since May.  The sum of the two spreads has surpassed 10.0 in twelve of the past thirteen months.  May 2011 was the last month in which Euroland enjoyed a combined advantage versus the United States. 

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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