America’s Manufacturing Advantage against Euroland Widened Last Month

January 3, 2012

The pace of expansion in U.S. manufacturing activity strengthened in December to an 8-month high.  The purchasing managers index advanced 1.2 points to 53.9, 3.9 points above the break-even line of 50. Every reading since August 2009 has exceeded that threshold.   In the euro area, by comparison, December saw a sub-50 PMI reading for a fifth straight month, although it was 0.5 points closer to 50 than in November.  The spread between the U.S. and euro area purchasing manager survey readings widened to 7.0 points despite a depreciating euro.  The average value of the euro in December, $1.364, was the weakest monthly mean in fifteen months and 9% lower than in April 2011. 

All reporting members of the euro area posted sub-49 manufacturing PMIs last month.  The readings in Greece, Spain, and Italy were below 46.0, signifying meaningful recessions. 

In the U.S. survey, production (59.9) was only marginally below 60.  Jobs grew 3.3 points to a solid score of 55.1, and the new orders component went up by 0.9 to 57.6.  U.S. manufacturing is doing surprising well, creating an unusually wide contrast with Euroland’s recession.  Not all of Europe is so bad.  The British PMI rose 2.2 points to a near-neutral reading of 49.9, while the Swiss index jumped 5.9 points to 50.7.  Data such as these reinforce expectations that the euro will soften further in the early months of 2012.  Another reason for the bearish sentiment is the enormous sum of maturing euro zone sovereign debt during the first quarter of the year.

Mfg PMIs 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
March 61.2 57.5 +3.7 1.400
April 60.4 58.0 +2.4 1.445
May 53.5 54.6 -1.1 1.433
June 55.3 52.0 +3.3 1.438
July 50.9 50.4 +0.5 1.423
August 50.6 49.0 +1.6 1.435
September 51.6 48.5 +3.1 1.377
October 50.8 47.1 +3.7 1.371
November 52.7 46.4 +6.3 1.356
December 53.9 46.9 +7.0 1.316

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

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