Performance Gap between U.S. and Euroland Narrowed Last Month

January 6, 2015

As in manufacturing reported last Friday, the respective U.S. and euro area service-sector purchasing manager surveys from December indicate a significantly reduced U.S. advantage.   The 4.6-point spread last month is down from a differential of 8.2 points in November and at its narrowest width since July.  The manufacturing PMI spread had declined from 8.6 points in November to 4.9 points in December, and the sum of the two spreads, shown in the right-most column of the table below was 9.5 points, 7.3 points less than in November and at a six-month low.

The U.S. non-manufacturing PMI dropped 3.1 points to a 10-month low of 56.2.  Business production declined by 7.2 points, prices fell 4.9 points and new orders decreased by 2.5 points.  The employment sub-index slid 0.7 points.

Euroland’s service-sector PMI bounced off of an 11-month low of 51.1 in November to 51.6 in December, which matches the second-weakest reading of 2014 seen way back in January of that year.  Germany, France, Ireland and Spain posted service PMIs above 50.  Germany’s 52.6 matched November’s result.  The French index improved 2.7 points to a 9-month high, while readings of 62.6 in Ireland and 54.3 in Spain were at 6- and 2-month highs.  Italy’s service-sector PMI, however, fell by 2.4 points to a 3-month low of 49.4.  In conjunction with a 19-month low in the manufacturing PMI of Euroland’s third largest economy to 48.4, Italy recorded a 13-month low of 49.4 in its composite purchasing managers index. The mounting possibility that Italy may be back-sliding into recession couldn’t come at a worse time, as it makes the Italian economy especially susceptible to market contagion should Greek voters select an anti-Ezone government later this month.

PMIs U.S. Ezone   U.S. Ezone   Sum of
  Services Services Spread Mf’g Mf’g Spread Spreads
Jan 2012 56.8 50.4 +6.4 54.1 48.8 +5.3 +10.9
Feb 56.1 48.8 +7.3 51.9 49.0 +2.9 +10.2
March 55.0 49.2 +5.8 53.3 47.7 +5.6 +11.4
April 53.7 46.9 +6.8 54.1 45.9 +8.2 +15.0
May 54.1 46.7 +7.4 52.5 45.1 +7.4 +14.8
June 52.7 47.1 +5.6 50.2 45.1 +5.1 +10.7
July 52.9 47.9 +5.0 50.5 44.0 +6.5 +11.5
August 54.3 47.2 +7.1 50.7 45.1 +5.6 +12.7
Sept 55.2 46.1 +9.1 51.6 46.1 +5.5 +14.6
October 54.8 46.0 +8.8 51.7 45.4 +6.3 +15.1
November 54.8 46.7 +8.1 49.9 46.2 +3.7 +11.8
December 55.7 47.8 +7.9 50.2 46.1 +4.1 +12.0
Jan 2013 55.2 48.6 +6.6 53.1 47.9 +5.2 +11.8
February 54.8 47.9 +8.1 53.1 47.9 +5.2 +13.3
March 54.5 46.4 +8.1 51.5 46.8 +4.7 +12.8
April 53.8 47.0 +6.8 50.0 46.7 +3.3 +10.1
May 54.0 47.2 +6.8 50.0 48.3 +1.7 +8.5
June 53.4 48.3 +5.1 52.5 48.8 +3.7 +8.8
July 55.9 49.8 +6.1 54.9 50.3 +4.6 +10.7
August 57.9 50.7 +7.2 56.3 51.4 +4.9 +12.1
Sept 54.5 52.2 +2.3 56.0 51.1 +4.9 +7.2
October 55.1 51.6 +3.5 56.6 51.3 +5.3 +8.8
November 54.1 51.2 +2.9 57.0 51.6 +5.4 +8.3
December 53.0 51.0 +2.0 56.5 52.7 +3.8 +5.8
Jan 2014 54.0 51.6 +2.4 51.3 54.0 -2.7 -0.3
February 51.6 52.6 -1.0 53.2 53.2 0.0 -1.0
March 53.1 52.1 +1.0 53.7 53.0 +0.7 +1.6
April 55.2 53.1 +2.1 54.9 53.4 +1.5 +3.6
May 56.3 53.2 +3.1 55.4 52.2 +3.2 +6.3
June 56.0 52.8 +3.2 55.3 51.8 +3.5 +6.7
July 58.7 54.2 +4.5 57.1 51.8 +5.3 +9.8
August 59.6 53.1 +6.5 59.0 50.7 +8.3 +14.8
Sept 58.6 52.4 +6.2 56.6 50.3 +6.3 +12.5
October 57.1 52.1 +5.0 59.0 50.6 +8.4 +13.2
November 59.3 51.1 +8.2 58.7 50.1 +8.6 +16.8
December 56.2 51.6 +4.6 55.5 50.6 +4.9 +9.5

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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