U.S. and Euroland Manufacturing Conditions Diverge
September 4, 2018
August saw the widest divergence that I can recall between U.S. factory conditions as measured by the ISM purchasing managers index and factory conditions in the euro area as measured by the IHS PMI. But there is a caveat. IHS also compiles a U.S. manufacturing PMI, and according to that measure, there was a deceleration in the rate of improvement that closely paralleled the deceleration of the rate of improvement in manufacturing conditions in the euro area.
The ISM PMI rose 3.2 points last month to 61.3. That level not only surpassed this year’s previous high of 60.2 in June but was in fact the strongest reading in 171 months going all the way back to May 2004. All sub-indices improved more rapidly in August than July, except for a 1.1-point drop in prices. And that’s good news, too. The gauges for new demand and production jumped 4.9 and 4.8 points, while that for jobs went up by 2.0 points.
The IHS manufacturing PMI for Euroland fell 0.5 points to a 21-month low of 54.6. Among individual countries, the readings for Italy, Austria, and Germany fell to 24-, 20-, and 2-month lows. The Irish PMI rose to a 7-month high. The Greek and French scores were the best in 3 months, and those for The Netherlands and Spain were 2-month highs.
The 6.7-point width of the spread between the ISM U.S. PMI and IHS’s Euroland PMI is 3.7 points wider than the month before and America’s most advantageous relative strength since late 2014.
But as mentioned above, the IHS manufacturing PMI for the United States, like its measure for Euroland, reflected a slowdown in the rate of improvement. Indeed, that index dropped by 0.6 points to 54.7. Moreover, the dollar continued to strengthen against the euro as seen in the right-most column of the table below. Such a trend if sustained ought to promote a convergence of factory operating conditions in the two economies.
| Mfg PMIs | U.S. | Euroland | Spread | EUR/USD |
| Jan 2013 | 53.1 | 47.9 | +5.2 | 1.330 |
| February | 53.1 | 47.9 | +5.2 | 1.334 |
| March | 51.5 | 46.8 | +4.7 | 1.295 |
| April | 50.0 | 46.7 | +3.3 | 1.301 |
| May | 50.0 | 48.3 | +1.7 | 1.299 |
| June | 52.5 | 48.8 | +3.7 | 1.319 |
| July | 54.9 | 50.3 | +4.6 | 1.309 |
| August | 56.3 | 51.4 | +4.9 | 1.331 |
| September | 56.0 | 51.1 | +4.9 | 1.335 |
| October | 56.6 | 51.3 | +5.3 | 1.364 |
| November | 57.0 | 51.6 | +5.4 | 1.349 |
| December | 56.5 | 52.7 | +3.8 | 1.370 |
| Jan 2014 | 51.3 | 54.0 | -2.7 | 1.361 |
| February | 54.3 | 53.2 | +1.1 | 1.366 |
| March | 54.4 | 53.0 | +1.4 | 1.380 |
| April | 55.3 | 53.4 | +1.9 | 1.380 |
| May | 55.6 | 52.2 | +3.4 | 1.374 |
| June | 55.7 | 51.8 | +3.9 | 1.360 |
| July | 56.4 | 51.8 | +4.6 | 1.354 |
| August | 58.1 | 50.7 | +7.4 | 1.332 |
| September | 56.1 | 50.3 | +5.8 | 1.290 |
| October | 57.9 | 50.6 | +7.3 | 1.268 |
| November | 57.6 | 50.1 | +7.5 | 1.247 |
| December | 55.1 | 50.6 | +4.5 | 1.232 |
| Jan 2015 | 53.5 | 51.0 | +2.5 | 1.162 |
| February | 53.3 | 51.0 | +2.3 | 1.135 |
| March | 52.3 | 52.2 | +0.1 | 1.083 |
| April | 51.6 | 52.0 | -0.4 | 1.081 |
| May | 53.1 | 52.2 | +0.9 | 1.116 |
| June | 53.1 | 52.5 | +0.6 | 1.123 |
| July | 51.9 | 52.4 | -0.5 | 1.101 |
| August
September October |
51.0
50.0 49.4 |
52.3
52.0 52.3 |
-1.3
-2.0 -2.9 |
1.114
1.123 1.121 |
| November
December Jan 2016 February March April May June July August September October November December Jan 2017 February March April May June July August September October November December Jan 2018 February March April May June July August |
48.4
48.0 48.2 49.7 51.7 50.7 51.0 52.8 52.8 49.4 51.7 52.0 53.5 54.5 56.0 57.6 56.8 55.3 55.5 56.7 56.5 59.3 60.2 58.5 58.2 59.3 59.1 60.8 59.3 57.3 58.7 60.2 58.1 61.3 |
52.8
53.2 52.3 51.2 51.6 51.7 51.5 52.8 52.0 51.7 52.6 53.5 53.7 54.9 55.2 55.4 56.2 56.7 57.0 57.4 56.6 57.4 58.1 58.5 60.1 60.6 59.6 58.6 56.6 56.2 55.5 54.9 55.1 54.9
|
-4.4
-4.8 -4.1 -1.5 +0.1 -1.0 -0.5 0.0 +0.8 -2.3 -0.9 -1.5 -0.2 -0.4 +0.8 +2.2 +0.6 -1.4 -1.5 -0.7 -0.1 +1.9 +2.1 0.0 -1.9 -1.3 -0.5 +2.2 +2.7 +1.1 +3.2 +5.3 +3.0 +6.7 |
1.076
1.090 1.087 1.111 1.114 1.134 1.130 1.124 1.106 1.120 1.121 1.103 1.078 1.054 1.063 1.064 1.069 1.072 1.106 1.124 1.153 1.182 1.191 1.176 1.174 1.184 1.220 1.234 1.234 1.227 1.181 1.167 1.169 1.155
|
Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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