Manufacturing PMI Spread Between U.S. and Eurozone Swings to Minus 1.2

September 1, 2015

The U.S. factory purchasing managers index reported by the Institute of Supply Management fell 1.6 points to a 27-month low of 51.1, whereas Euroland’s counterpart, compiled by Markit Economics, dipped just 0.1 points. The resulting spread between the two series, -1.2, was most disadvantageous to the United States since very early in 2014. It seems that dollar appreciation from $1.38 on average in March-April 2014 has taken a cumulative toll on U.S. export competitiveness and is depressing U.S. inflation even as the Fed moves closer to a rendezvous with interest rate normalization. I can’t find a precedent when the Fed previously raised interest rates with inflation below 1.5% and against the backdrop of a nascent bear market in equities. Throw in the additional fact that a land and reality TV star leads the 2016 presidential sweepstakes, and it’s easy to understand why investor sentiment turned so sour in August.

Among components of the U.S. PMI, prices fell 5 points to a mere 39%, while orders, output and jobs dropped 4.8, 2.4, and 1.5 points in August. In Euroland, Germany, The Netherlands, Ireland, and Spain experienced faster growth in manufacturing than the United States, while Austria’s pace was less. Activity contracted in France and Greece.

Mfg PMIs	U.S.	Euroland	Spread	EUR/USD
Jan 2013	53.1	47.9	+5.2	1.330
February	53.1	47.9	+5.2	1.334
March	51.5	46.8	+4.7	1.295
April	50.0	46.7	+3.3	1.301
May	50.0	48.3	+1.7	1.299
June	52.5	48.8	+3.7	1.319
July	54.9	50.3	+4.6	1.309
August	56.3	51.4	+4.9	1.331
September	56.0	51.1	+4.9	1.335
October	56.6	51.3	+5.3	1.364
November	57.0	51.6	+5.4	1.349
December	56.5	52.7	+3.8	1.370
Jan 2014	51.3	54.0	-2.7	1.361
February	54.3	53.2	+1.1	1.366
March	54.4	53.0	+1.4	1.380
April	55.3	53.4	+1.9	1.380
May	55.6	52.2	+3.4	1.374
June	55.7	51.8	+3.9	1.360
July	56.4	51.8	+4.6	1.354
August	58.1	50.7	+7.4	1.332
September	56.1	50.3	+5.8	1.290
October	57.9	50.6	+7.3	1.268
November	57.6	50.1	+7.5	1.247
December	55.1	50.6	+4.5	1.232
Jan 2015	53.5	51.0	+2.5	1.162
February	52.9	51.0	+1.9	1.135
March	51.5	52.2	-0.7	1.083
April	51.5	52.0	-0.5	1.081
May	52.8	52.2	+0.6	1.116
June	53.5	52.5	+1.0	1.123
July	52.7	52.4	+0.3	1.101
August	51.1	52.7	-1.2	1.114

This entry was posted on Tuesday, September 1st, 2015 at 1:20 pm 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.

Currency Thoughts