U.S. Minus Euroland Manufacturing PMI Spread Narrowed Last Month

March 1, 2011

Euroland’s purchasing managers index advanced 1.7 points to 59.0 last month.  The rise was nearly three times larger than the 0.6 point improvement of the U.S. manufacturing PMI index, and trimmed the differential between the two data series to a U.S. advantage of 2.4 points from 3.5 points in January.  The U.K. manufacturing PMI reading of 61.5 was identical to January’s score, thus remaining at the highest level seen in this data series.  Factory sector activity is expanding solidly in all three economies.  An index value of 50 connotes neutrality between contraction and expansion.  The further above 50 lies the PMI score, the more robust is activity, and an increased value from one month to the next, as occurred last month in both the euro area and the United States, signifies a faster rate of expansion.  The greatest rates of contraction occurred in December 2008 in the United States and February 2009 in Euroland’s case.  The rate of expansion has quickened in last seven straight months in the U.S. and in the past five consecutive months in the euro area.

Improvement in the United States during February was concentrated in production and employment, both of which were 2.8% higher than in January.  However, new demand edged just 0.2 points higher last month.  In Europe, the largest three economies of Germany, France, and Italy had scores that were each over 2.0 points better than during January.  The Dutch index jumped by 3.2 points.  Notable peripherals did not do so well.  The Irish index went up 0.9 points.  The Spanish index ticked just 0.1 higher, and the Greek index was unchanged and far below 50 at 42.8.  Input price inflation was significant on both sides of the Atlantic.

In the United States, the differential between the upper class of income earners and everybody else continues to widen.  In Europe, the spread between successful, highly productive economies and the troubled ones is also widening.  Since April 2010, the spread between the U.S. and Euroland purchasing managers indices exceeded three points in amplitude (that is +/- 3.0) just once, that being January of this year.  This tendency to evolve in a more or less synchronized fashion saw the euro first weaken to a monthly average of $1.220 in June 2010 and then rise to $1.365 on average last month.

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 57.1 54.2 +2.9 1.368
March 60.4 56.6 +3.8 1.356
April 59.6 57.6 +2.0 1.342
May 57.8 55.8 +2.0 1.255
June 55.3 55.6 -0.3 1.220
July 55.1 56.7 -1.6 1.278
August 55.2 55.1 +0.1 1.288
September 55.3 53.7 -0.4 1.308
October 56.9 54.6 +2.3 1.389
November 58.2 55.3 +2.9 1.368
December 58.5 57.1 +1.4 1.323
Jan 2011 60.8 57.3 +3.5 1.337
February 61.4 59.0 +2.4 1.365

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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