November PMIs: European Disadvantage Versus United States Narrows

December 3, 2010

In the United States and Europe, both manufacturing and non-manufacturing recoveries persisted into the latter half of the fourth quarter.  That’s signified in the table below by above-50 readings in all categories last month (the last row of the table).  However, the differential between the strength of the U.S. and Euroland recoveries narrowed. In manufacturing reported this past Wednesday, the U.S. index slid 0.3 points to 56.6, while the euro area index increased 0.7 to 55.3.  Service-sector results arriving today showed improvement in both regions, but Euroland’s 2.1-point advance was three times greater than the 0.7 point increase of the U.S. index.  The right-most column of the table, which gives the arithmetic sum of the two differentials, has fluctuated widely over the last eight months from +4.3 last March (an advantage for the United States) to -3.2 in August, +3.3 in October and less than +1.0 last month.  This pattern corroborates the point ECB President Trichet made at yesterday’s press conference that Europe compares decently with the United States, more so than bond market behavior would suggest.  Euroland’s recovery has been more consistently better than expected.  Euroland aggregate fiscal and current account deficits are lower than America’s.  Confidence is greater that the ECB will preserve long-term price stability in comparison to the Fed.  Euroland’s crisis is more political than economic.  A single currency area needs a more unified fiscal policy to complement its one-size-fits-all monetary policy.

The aggregated figures in the table below mask significant sub-component trends in non-manufacturing.  U.S. orders and jobs grew faster and price pressure diminished on the one hand, while production growth slowed in November.  Europe’s discrepancies are geographical.  The Germany economy with a reading of 59.2 is flying high above all other members of the economic and monetary union known collectively as EMU.  France and Italy posted decent but less stellar scores of 55.0 and 54.4, while the group’s fourth biggest member, Spain, scored a recessionary 48.3, and Ireland was barely treading water at 50.8.

PMIs U.S. Ezone   U.S. Ezone   Sum of
  Services Services Spread Mf’g Mf’g Spread Spreads
Feb 2009 42.1 39.2 +2.9 35.7 33.5 +2.2 +5.1
March 41.2 40.9 +0.3 36.4 33.9 +2.5 +2.8
April 43.9 43.8 +0.1 40.4 36.8 +3.6 +3.7
May 44.5 44.8 -0.3 43.2 40.7 +2.5 +2.2
June 46.3 44.7 +1.6 45.3 42.6 +2.7 +4.3
July 46.7 45.7 +1.0 49.1 46.3 +2.8 +3.8
August 48.2 49.9 -1.7 52.8 48.2 +4.6 +2.9
Sept 50.1 50.9 -0.8 52.4 49.3 +3.1 +2.3
October 50.1 52.6 -2.5 55.2 50.7 +4.5 +2.0
November 48.4 53.0 -4.6 53.7 51.2 +2.5 -2.1
December 49.8 53.6 -3.8 54.9 51.6 +3.3 -0.5
Jan 2010 50.5 52.5 -2.0 58.4 52.4 +6.0 +4.0
Feb 53.0 51.8 +1.2 56.5 54.2 +2.3 +3.5
March 55.4 54.1 +1.3 59.6 56.6 +3.0 +4.3
April 55.4 55.6 -0.2 60.4 57.6 +2.8 +2.6
May 55.4 56.2 -0.8 59.7 55.8 +3.9 +3.1
June 53.8 55.5 -1.7 56.2 55.6 +0.6 -1.1
July 54.3 55.8 -1.5 55.5 56.7 -1.2 -2.7
August 51.5 55.9 -4.4 56.3 55.1 +1.2 -3.2
Sept 53.2 54.1 -0.9 54.4 53.7 +0.7 -0.2
October 54.3 53.3 +1.0 56.9 54.6 +2.3 +3.3
November 55.0 55.4 -0.4 56.6 55.3 +1.3 +0.9

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

Tags: , ,

ShareThis

This entry was posted on Friday, December 3rd, 2010 at 9:49 am and is filed under Deeper Analysis. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Comments are closed.

css.php