Higher Service-Sector PMI Readings in the United States and Euroland Plus Comments on Other U.S. Statistics Released Today

December 5, 2012

The service-sector purchasing manager indices rose in November by 0.5 points in the United States and 0.7 points in the euro area.  The spread  between those readings narrowed marginally to +8.0 points as a result.  Notably, U.S. services at 54.7 and comfortably above the 50 no-change level connotes non-stalling expansion, whereas Euroland’s 46.7 points to a greater contraction of GDP this quarter than seen in the third quarter.  Earlier reported manufacturing PMIs depicted a greater disparity — one favoring Euroland — in the two regions of the change between October and November.  Euroland’s manufacturing PMI went up 0.8 points, whereas the U.S. counterpart fell by 2.2 points to the lowest score in at least two years.  Even so, U.S. manufacturing activity still contracted much more slowly last month than did Ezone factory activity. 

Although at a 3-month low, the 11.3 sum of the two PMI spreads was above 10.0 for the 13th time in 14 months. 

In the U.S. service-sector PMI survey, significant improvement in sales and orders were mitigated by lower readings in jobs and prices.  The mood of U.S. businesses was characterized as “cautiously optimistic” in the wake of the election but heading into a possible maelstrom of mandated fiscal austerity.  Among reporting members within the euro area, only Ireland with a 56.1 reading on its service-sector PMI was above the 50 no-change threshold.  The Irish reading matched the prior month’s 5-year high, but the readings of 45.8 in France, 44.6 in Italy, and 42.4 in Spain indicated fairly strong downturns in the region’s second, third, and fourth largest economies.  With a score of 49.7, German service sector activity was pretty flat last month. 

In Britain, which although part of the EU is not a member of the European Economic and Monetary Union, the service-sector PMI slid 0.4 points to a 23-month low of 50.2.  Earlier reports this week showed a 1.6-point drop of the British construction PMI to a sub-50 score and 3-month low of 49.3.  The U.K. manufacturing PMI was at 49.1 last month, up from 47.5 in August but below 50 for an eighth consecutive time.

PMIs U.S. Ezone   U.S. Ezone   Sum of
  Services Services Spread Mf’g Mf’g Spread Spreads
Jan 2011 58.3 55.9 +2.4 59.9 57.3 +2.6 +5.0
Feb 59.0 56.8 +2.2 59.8 59.0 +0.8 +3.0
March 56.3 57.2 -0.9 59.7 57.5 +2.2 +1.3
April 54.4 56.7 -2.0 59.7 58.0 +1.7 -0.3
May 54.5 56.0 -1.5 54.2 54.6 -0.4 -1.9
June 53.3 53.7 -0.4 55.8 52.0 +3.8 +3.4
July 53.4 51.6 +1.8 51.4 50.4 +1.0 +2.8
August 53.8 51.5 +2.3 52.5 49.0 +3.5 +5.8
Sept 52.6 48.8 +3.8 52.5 48.5 +4.0 +7.8
October 52.6 46.4 +6.2 51.8 47.1 +4.7 +10.9
November 52.6 47.5 +5.1 52.2 46.4 +5.8 +10.9
December 53.0 48.8 +4.2 53.1 46.9 +6.2 +10.4
Jan 2012 56.8 50.4 +6.4 54.1 48.8 +5.3 +10.9
Feb 57.3 48.8 +8.5 52.4 49.0 +3.4 +11.9
March 56.0 49.2 +6.8 53.4 47.7 +5.7 +12.5
April 53.5 46.9 +6.6 54.8 45.9 +8.9 +15.5
May 53.7 46.7 +7.0 53.5 45.1 +8.4 +15.4
June 52.1 47.1 +5.0 49.7 45.1 +4.6 +9.6
July 52.6 47.9 +4.7 49.8 44.0 +5.8 +10.5
August 53.7 47.2 +6.5 49.6 45.1 +4.5 +11.0
Sept 55.1 46.1 +9.0 51.5 46.1 +5.4 +14.4
October 54.2 46.0 +8.2 51.7 45.4 +6.3 +14.5
November 54.7 46.7 +8.0 49.5 46.2 +3.3 +11.3

In other U.S. data released today,

  • ADP estimated a greater-than-anticipated 118K increase of private-sector jobs in November, which would have been a rise of slightly more than 200K if not for the effects of Hurricane Sandy.
  • Factory orders increased by a further 0.8% in October after snapping back 4.5% in September from a 5.1% slide in August.  Non-durable orders in the past three reported months went up by 2.2% in August, 0.9% in September and 1.1% in October.
  • Productivity growth in the third quarter was revised upward by a percentage point to 2.9%.  Such climbed 1.7% on year on top of average growth of 1.5% per annum between 3Q09 and 3Q11.  All things considered, that’s a decent pace, which goes to prove that strong productivity, while appealing, is not the full guarantee of prosperity in the post-globalization era.
  • Unit labor costs sank 1.9% at an annualized pace between 2Q and 3Q and was merely 0.1% higher than in the third quarter of 2011.  Unit labor costs went up just 0.4% per annum between the third quarters of 2009 and 2012, underscoring the lack of a key condition needed for a sustained acceleration of inflation.  Alternatively, these results highlight the erosion of economic power of labor vis-a-vis entrepreneurship.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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