Service-Sector PMIs Show Greatest Ezone Advantage Versus U.S. Since Last December

September 3, 2009

PMIs U.S. Ezone   U.S. Ezone   Sum of
  Services Services Spread Mf’g Mf’g Spread Spreads
Feb 2008 49.7 52.3 -2.6 48.8 52.3 -3.5 -6.1
March 49.9 51.6 -1.7 49.0 52.0 -3.0 -4.7
April 51.9 52.0 -0.1 48.6 50.7 -2.1 -2.2
May 51.2 50.6 +0.6 49.3 50.6 -1.3 -0.7
June 48.8 49.1 -0.3 49.5 49.2 +0.3 0.0
July 49.6 48.3 +1.3 49.5 47.4 +2.1 +3.4
August 50.4 48.5 +1.9 49.3 47.6 +2.1 +4.0
Sept 50.0 48.4 1.6 43.4 45.0 -1.6 0.0
October 44.6 45.8 -1.2 38.7 41.1 -2.4 -3.6
November 37.4 42.5 -5.1 36.6 35.6 +1.0 -4.1
December 40.1 42.1 -2.0 32.9 33.9 -1.0 -3.0
Jan 2009 42.9 42.2 +0.7 35.6 34.4 +1.2 +1.9
Feb 41.6 39.2 +2.4 35.8 33.5 +2.3 +4.7
March 40.8 40.9 -0.1 36.3 33.9 +2.4 +2.3
April 43.7 43.8 -0.1 40.1 36.8 +3.3 +3.2
May 44.0 44.8 -0.8 42.8 40.7 +2.1 +1.3
June 47.0 44.7 +2.3 44.8 42.6 +2.2 +4.5
July 46.4 45.7 +0.7 48.9 46.3 +2.6 +3.3
August 48.4 49.9 -1.5 52.9 48.2 +4.7 +3.2

 

Euroland’s Purchasing Managers index rose 4.2 points in August, roughly twice as much as its U.S. counterpart.  Both indices remained below the 50 line of demarcation between expanding and contracting activity, but now each is quite close to that threshold.  Moreover, Euroland overtook the United States and produced the biggest Ezone advantage since end-2008 with a spread of minus 1.5.  In the table above, only February 2008 and the final two months of 2008 denote bigger service-sector advantages in Euroland’s favor.

Manufacturing PMI readings produced a different pattern in the spread between the United States and euro area but a similarity in that both readings climbed.  This time it was the U.S. reading that rose four points to a 26-month high and also exceeded the 50 yard line.  Meanwhile, Euroland’s score went up by only about half as many points.  Consequently, the U.S.-minus-Ezone differential widened to 4.7 points from 2.6 points in July, and the sum of the two spreads (shown in the right-most column) was left hardly changed at 3.2 points.

The two data series do not show an unchanged relative situation, however, and that is because services represent more than twice as large a percentage of all economic activity as does manufacturing. An improvement in non-manufacturing will exert more influence over total GDP as would an identical improvement in factory production.  Dovetailing these findings, new forecasts for projected GDP growth in 2009 released today by the OECD did not change the U.S. figure of minus 2.8% but revised estimated growth in Euroland to minus 3.9% from a forecast of minus 4.8% made three months ago.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.

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