U.S. Regains PMI-Manufacturing Lead From Europe

September 1, 2010

The U.S. minus euro area PMI differential in manufacturing swung to +1.2 in August from minus 1.2 in July.  The spread had been negative in July for only the first time since December 2008, averaging +3.0 in that 18-month span and peaking in January 2010 at +6.0.  The U.S. purchasing managers index rose 0.8 points, while Euroland’s fell be 1.6 points despite a 1.2-point improvement in the French index.  Orders rose more slowly in both the United States and Euroland last month, but the indices for U.S. production and jobs advanced by 2.9 and 1.8 points to elevations of 59.9 and 60.4.  Inflation also accelerated, partly reflecting a softer dollar, and that is something Fed officials likely welcomed. 

The German, Dutch and Italian PMIs fell by 3.0, 1.4 and 1.6 points but remained comfortably above the 50 line that divides expansion from contraction.  The Spanish (51.1) and Irish (51.1) indices were uncomfortably close to 50, and a reading of 43.0 in Greece highlighted the austerity-imposed recession besieging that economy.  Factory sector momentum in both the U.S. and Euroland economies, that is the second derivative, turned negative after April, indicating that the pace of expansion crested that month and began to slow down from May onward.

Mf’g PMI’s U.S. Euroland Spread EUR/USD
Feb 2008 48.8 52.3 -3.5 1.475
March 49.0 52.0 -3.0 1.553
April 48.6 50.7 -2.1 1.574
May 49.3 50.6 -1.3 1.555
June 49.5 49.2 +0.3 1.557
July 49.5 47.4 +2.1 1.577
August 49.3 47.6 +1.7 1.497
September 43.4 45.0 -1.6 1.437
October 38.7 41.1 -2.4 1.331
November 36.6 35.6 +1.0 1.268
December 32.9 33.9 -1.0 1.351
Jan 2009 35.6 34.4 +1.2 1.326
February 35.7 33.5 +2.2 1.303
March 36.4 33.9 +2.5 1.306
April 40.4 36.8 +3.2 1.318
May 43.2 40.7 +2.5 1.365
June 45.3 42.6 +2.7 1.401
July 49.1 46.3 +2.8 1.409
August 52.8 48.2 +4.6 1.426
September 52.4 49.3 +3.1 1.455
October 55.2 50.7 +4.5 1.489
November 53.7 51.2 +2.5 1.491
December 54.9 51.6 +3.3 1.459
Jan 2010 58.4 52.4 +6.0 1.409
February 56.5 54.2 +2.3 1.368
March 59.6 56.6 +3.0 1.356
April 60.4 57.6 +2.8 1.342
May 59.7 55.8 +3.9 1.255
June 56.2 55.6 +0.6 1.220
July 55.5 56.7 -1.2 1.278
August 56.3 55.1 +1.2 1.288

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express  permission.

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