The NTC-Reuter Flash PMIs for November show an unexpected bounce for Manufacturing and slip for Services. Both readings are weak, however. Placed in the past 23-month range (the whole of the life of the services index) services are the weakest ever at a reading of 53.72. The MFG index is in the 18.5 percentile of its range for this period. Although taking MFG back to 1997, we find it resides in the 55th percentile of its much longer range experience. That experience includes episodes of recession whereas for services and MFG the shorter comparison does not.

The graph, however, underscores that the peaking and dropping of the indices dates from super-peaking in 2006 then to a dropping from a lower plateau in mid 2007. Currently the indices are chopping around at a much lower level that barely indicates continuing growth (above a level of 50).

We know that the strong euro is part of the problem, but interestingly the outlook and slowing has spread though the services industries just as fast even though MFG is sure to be affected first by foreign exchange issues. With exports plus imports accounting for 40% of GDP in some EMU nations it is no wonder that the impact of a strong currency spreads faster that in the US where the sum is so much smaller.

In Germany the export association says firms can still export at an exchanger rate to the dollar of 1.50 but Merkel is registering worry already and orders of all sorts across the Euro Area members are slowing if not weakening. The NTC indices memorialize and underscore that Europe is slowing and is well off peak. They tell us more topically what other indices will hold for us in the months ahead. While certain groups of exports may be more resilient than others some line seems to have been crossed that says that a the euro has risen above a critical level that is taking business prospects down a notch for some critical mass of companies. In part this means that US-based firms should benefit form the exact factor that is hurting European business (FX competitiveness), but due to the weakness in Europe that the euro strength also engenders, that the amount of benefit will be limited.