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Economy in Brief

Services Sectors Tank in US and in Europe
by Robert Brusca November 5, 2008

The chart serves as yet another reminder as to why it has been loopy for observers to have insisted that Europe and the US had become disconnected economically – the so-called de-coupling argument. The MFG sectors across countries are always closely connected because they trade goods and compete in the same markets for the same business. The services sectors have a lower incidence of tradable services – much lower than for goods. Still, the overall EMU and US economies have been on such similar cycles that their two service sector indices, with very few exceptions, have been on the same page.

The EMU in country level measures are mostly on their respective lowest readings since May of 2000. The US measure is in its bottom 13% of its range –also very weak. Germany’s measure is ‘only’ in the bottom 28% of its range.

The drop in the EMU index in October is its largest m/m drop since May 2000 when the comparisons start.

We can also see that consumer confidence is very low in most of these same places. Since the service sector provides the bulk of the jobs, this is an expected result.

However we can also use this report as a double check on the MFG report which earlier was reported to have fallen so sharply. These two sectors are showing the same sharp onset of weakness. That tends to imbue the signal with a greater veracity than if the result came from just one survey. The weak signal therefore seems to be the result of a real weakness in the economy rather than from some quirk of the calendar or a peculiarity of one survey.

NTC Services Indices for EU/EMU
  OCT-08 SEP-08 AUG-08 3Mo 6Mo 12Mo Percentile
Euro-13 45.76 48.44 48.46 47.55 48.45 50.37 0.0%
Germany 48.31 50.25 51.39 49.98 51.49 51.78 28.3%
France 47.54 50.14 48.04 48.57 48.96 53.05 0.4%
Italy 45.68 49.42 48.47 47.86 47.63 48.32 0.6%
Spain 32.22 36.09 38.98 35.76 37.39 41.65 0.0%
Ireland 36.05 40.80 39.82 38.89 40.65 45.31 0.0%
EU only              
UK (CIPs) 42.39 45.95 49.17 45.84 46.98 49.60 0.0%
US NONFMG ISM 44.20 52.10 51.60 49.30 50.17 50.48 13.6%
EU Commission Indices for EU and EMU
EU Index OCT-08 SEP-08 AUG-08 3Mo 6Mo 12Mo Percentile
EU Services -10 -4 -2 -20.67 -19.00 -14.92 0.0%
EMU OCT-08 SEP-08 AUG-08 3Mo 6Mo 12Mo Percentile
Services -6 0 1 -1.67 2.17 5.79 0.0%
Cons Confidence -24 -19 -19 -20.67 -19.00 -1.11 0.0%
Consumer confidence by country
Germany-Consumer Confidence -12 -9 -9 -10.00 -7.50 -3.83 34.4%
France-Consumer Confidence -32 -24 -23 -26.33 -23.83 -18.58 0.0%
Ital-Consumer Confidence -23 -22 -24 -23.00 -22.83 -22.83 13.8%
Spain-Consumer Confidence -44 -39 -37 -40.00 -38.00 -29.08 0.0%
UK-Consumer Confidence -27 -23 -24 -24.67 -22.50 -15.25 0.0%
percentile is over range since May 2000      
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