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Economy in Brief

Markit's Service PMI Rises In EMU But Still Shows Contraction
by Robert Brusca June 3, 2009

The real story this month is not that the services PMI in EMU continued to improve, but that in the UK the PMI reading for the services sector leapt over the neutral zone to score a positive reading at 51.72.

The UK is now showing the strongest service sector in EU. At 48.33 and still showing decline, France is in second place. Spain‘s service sector weakened this month, dropping from 42.30 to 39.14 and is now below Ireland’s reading.

The services reading for EMU is in the bottom 26% of its range. But that is stronger than the services reading from the EU Commission index for services; that reading is in the bottom 3.7% of is range. Consumer confidence for EMU is also low in the bottom 8% of its range.

The news here is that the service sector, as is true for the MFG sector, finds improvement is in train. That is good news and what we have come to expect. Different surveys show different degrees of change – that is not too surprising. Within the Zone we have countries moving at different speeds- not surprising either–as well as in different directions, and that is not good at all. The UK is the strongest EU country in terms of its service sector, Spain with 18% unemployment is seeing its service sector being dragged down. Were Spain the UK its currency might drop to stimulate the economy, but since Spain is In EMU and the UK is out, that possibility is not Spain’s and the UK does not need such stimulus. Spain is a problem for EMU and despite rhetoric to the contrary the Zone itself owns Spain some assistance. In a currency union, even one with separate fiscal responsibilities like fiscal Japanese lunch box there still are joint responsibilities to the members.

Markit Services Indices for EU/EMU
  May-09 Apr-09 Mar-09 3Mo 6Mo 12Mo Percentile
Euro-Area 44.82 43.76 40.95 43.18 42.17 44.63 26.1%
  Germany 45.17 43.76 42.30 43.74 44.05 47.05 19.6%
  France 48.33 46.52 43.64 46.16 43.63 45.94 36.5%
  Italy 43.08 42.05 39.10 41.41 40.58 43.38 21.8%
  Spain 39.14 42.30 34.11 38.52 35.20 35.04 33.9%
  Ireland 39.49 32.16 35.69 35.78 34.53 36.65 22.4%
EU only
  UK (CIPs) 51.72 48.68 45.47 48.62 45.30 45.33 56.9%
EU Commission Indices for EU and EMU
EU Index May-09 Apr-09 Mar-09 3Mo 6Mo 12Mo Percentile
  EU Services -26 -30 -31 -32.00 -31.67 -26.17 8.3%
EMU May-09 Apr-09 Mar-09 3Mo 6Mo 12Mo Percentile
  Services -23 -24 -25 -24.00 -22.50 -14.04 3.7%
  Cons Confidence -31 -31 -34 -32.00 -31.67 -18.08 8.3%
Consumer Confidence By Country
Germany-Ccon -35 -34 -31 -33.33 -29.67 -19.50 0.0%
France-Ccon -33 -32 -36 -33.67 -34.33 -30.00 7.5%
Ital-Ccon -26 -25 -31 -27.33 -27.67 -25.75 15.2%
UK-Ccon -22 -22 -28 -24.00 -28.00 -26.25 34.2%
Percentile is over range since May 2000
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