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Economy in Brief

Euro Area PMIs
by Robert Brusca November 21, 2008

The Markit/NTC readings on conditions in services and MFG in the Euro Area show another chilling story. The indices are down to all time lows that covers 11-Years for the Manufacturing PMI and 10-years for services.

The MFG index stands at a level of 36.16 well below the neutral mark of 50. The services PMI stands at 43.32 a very low reading for a less volatile sector. The services PMI is only slightly less volatile than the MFG readings on m/mo levels basis. But the MFG PMI has a range of variation that is 20% larger. Even so in terms of m/m changes in the indices services is slightly more volatile.

Compared to the US where the PMIs (ISM) measure MFG and Non MFG, the MFG and Services sectors in Europe are far more closely correlated. Their simple correlation is 0.89 compared to 0.78 for the tow US measures. This suggest the US economy has room for more independent activity in each sector possibly a better ability to avert sector contagion, whereas in Europe when one sector does something, the other is quick to follow. That is bad news when economic growth is slipping. The US MFG sector is about 25% more volatile than its European counterpart whereas the US Nonmanufacturing sector is about 4 percent less volatile than its European counterpart. Right now all PMIs are sinking and are very weak.

FLASH Readings:  Market PMIs for the Euro Area 13
  Manufacturing Services
Nov-08 36.16 43.32
Oct-08 41.10 45.76
Sep-08 44.97 48.44
Aug-08 47.55 48.46
Averages
3-Month 44.54 46.13
6-Month 46.79 47.39
12-Month 49.50 49.66
125-Mo Range
High 60.47 62.36
Low 36.16 43.32
% Range 0.0% 0.0%
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