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Economy in Brief

Graceful but Painful Swan Dive in MFG PMI’s… Into an Empty Pool 
by Robert Brusca December 01, 2008

The NTC final indices are now out and are weaker than their FLASH counterparts were. The percentile column on the far right seems due for an ‘out of order’ sign except that it is not out of order. The overall index as well as the country components and the UK index are all at lifetime lows- even for Germany an index that goes back to 1996 and for the UK that goes back to 1992. The drop off in MFG in Europe has been very sharp and the authorities have been caught off guard. They watched the troubles in the US unfold largely thinking that the problems would not migrate over the ocean to such a great degree but of course they have.

Germany’s MFG index stood at 49.68 barely indicating any contraction as recently as August, just three short months ago. At that time the EMU index had slipped to 47.55. Over three months the EMU MFG index has dropped by 11.97 points compared to a drop of 14.02 points for Germany. Over six months the EMU index is lower by 15.02 points compared to a drop of 17.91 for Germany. But over 12-months the EMU drop at 17.22 is very similar to Germany’s drop of 18.08 points. Spain’s index has dropped by 21.31 points over 12-months and the UK, an EU member nation, has seen its MFG index drop by 20.23 points over that period.

In short, Europe is sliding very fast. The US PMI dropped by 11.5 points in 12 months though October compared to a drop of 10.42 points for EMU. So the US unravel has been a bit faster than Europe’s –at least through October. The US MFG report for November will be out later today. It would have to fall to 28.32 in order for the US MFG PMI (ISM) to have the same point drop as the EMU index over the last 12-months (though November). To do that it would have to drop to a level of 21.7. For now it appears that Europe has caught up to or surpassed the US in the race to show which region’s MFG sector is declining the most rapidly.

A dubious distinction…

NTC/Markit MFG Indices
  Nov-08 Oct-08 Sep-08 3-Mo 6-Mo 12-Mo Percentile
Euro Area 13 35.58 41.10 44.97 40.55 44.29 48.07 0.0%
Germany 35.66 42.88 47.36 41.97 46.51 50.31 0.0%
France 37.28 40.59 42.97 40.28 43.82 48.25 0.0%
Italy 34.95 39.67 44.42 39.68 43.06 46.35 0.0%
Spain 29.42 34.60 38.32 34.11 37.43 42.16 0.0%
Austria 38.26 43.44 46.01 42.57 45.28 48.69 0.0%
Greece 42.25 48.14 50.81 47.07 49.85 51.37 0.0%
Ireland 37.10 39.69 43.70 40.16 42.25 44.59 0.0%
Netherlands 38.71 45.28 48.30 44.10 46.86 49.72 0.0%
UK 34.36 40.70 40.80 38.62 41.78 46.23 0.0%
percentile is over range since March 2000
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