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Economy in Brief

EMU Services: In Near Lockstep With US
by Robert Brusca May 6, 2009

April’s jump is the second largest increase in Markit’s e-Area Services PMI index since late 2000. The April surge brings the index up to 43.76 still well below a neutral reading of 50 but that still leaves the index relatively low in its historic range in the 21st percentile. Over the same period, however, the EU Commission’s EMU service sector index stands at the 8th percentile in its range, a relatively weaker reading. If we assess the Markit reading on a queuing basis, by ranking the index reading and telling where the current percentile of the ranked readings stands, we find it is in the bottom 5% of all readings. That is more similar to the dismal EU Commission’s assessment. Anyway you slice it the index it is showing improvement but the current assessment is still poor.

The month’s move is strongly in the right direction and the improvement is cast wide across reporting EMU countries. It also fits nicely with the pattern of improvement reported by the Markit MFG indices. The current ISM reading ranks 97th out of the last 102 readings. Most EMU countries are at about that some relative position. Ireland is worse off, posting the second worst reading in the last 102 observations. Over this same period the US ISM for nonMFG, the closest comparison we have to the EMU reading, also ranks 97th out of the same 102 observations. The US and EMU ‘services’ sectors are roughly in the same cyclical position.

In terms of the levels of the readings the US is now a hair behind the level posted in EMU and behind it as a percentage of the mean as well. So EMU services have rebounded quite sharply but in comparisons with the US, the US rebound was sharper. The main reason that the US is better off in percentile terms is that it had carved out a lower low in this cycle than did EMU services. So its standing in its range is better relative to its lower low. Both service sectors are now on about the same path for recovery.

Markit Services Indices for EU/EMU
  Apr-09 Mar-09 Feb-09 3Mo 6Mo 12Mo Percentile
Euro-13 43.76 40.95 39.24 41.32 41.77 45.11 21.1%
  Germany 43.76 42.30 41.32 42.46 44.05 47.77 12.4%
  France 46.52 43.64 40.18 43.45 43.27 46.12 25.9%
  Italy 42.05 39.10 37.85 39.67 39.98 43.80 17.5%
  Spain 42.30 34.11 31.73 36.05 33.39 35.39 43.7%
  Ireland 32.16 35.69 31.78 33.21 33.39 37.02 1.1%
EU only
  UK (CIPs) 48.68 45.47 43.24 45.80 43.36 45.17 42.0%
  US NONFMG ISM 43.70 40.80 41.60 42.03 41.08 45.09 26.3%
EU Commission Indices for EU and EMU
EU Index Apr-09 Mar-09 Feb-09 3Mo 6Mo 12Mo Percentile
  EU Services -30 -31 -29 -32.67 -30.67 -24.83 8.3%
EMU Apr-09 Mar-09 Feb-09 3Mo 6Mo 12Mo Percentile
  Services -24 -25 -24 -24.33 -20.67 -11.42 1.9%
  Cons Confidence -31 -34 -33 -32.67 -30.67 -15.89 8.3%
Consumer confidence by country
  Germany-Ccon -34 -31 -29 -31.33 -26.33 -16.92 0.0%
  France-Ccon -32 -36 -36 -34.67 -33.67 -28.75 10.0%
  Ital-Ccon -25 -31 -28 -28.00 -27.67 -25.25 18.2%
  Spain-Ccon -39 -43 -48 -43.33 -44.00 -41.00 18.8%
  UK-Ccon -22 -28 -32 -27.33 -28.83 -25.67 34.2%
percentile is over range since May 2000
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