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Economy in Brief

Euro Area Flash PMIs
by Robert Brusca November 23, 2009

The Euro Area FLASH PMIs are on the rise in November. The flash Services reading is at its highest reading since November 2007. The MFG index is at its highest since March 2008. It is the second consecutive MFG reading above 50 and the third consecutive reading above 50 for services. Readings above 50 indicate expansion.

However, the percentage increase in the Yr/Yr readings for MFG and for services each have receded for two months running as the pace of the recovery’s improvement is slowing.

Since March of 2009 the MFG index has improved by 2.4 points per month on average. Each monthly increase has been a gain of one point or better until this month, November 2009, when the improvement was just 0.32 points.

Over this same span the services index averaged a monthly increase of 1.66 per month. However, in June of 2009 the e-Zone Services measure did decline by 0.17 points interrupting a string of increases. Except for that drop this month’s rise of 0.82 is the weakest since March of 2009.

Both services and MFG sectors continue to increase but are doing so at increasing slower rates. This is despite the fact that they reside only in the mid to low 60th percentile of their respective ranges, ranges that extend back to July of 1998 for both of them (the MFG range does have a bit longer history, however0.

Manufacturing stands at a flash reading of 50.98 compared to an average reading of 51.09 since July of 1998. For services the current 53.17 reading compares to an average reading of 53.69. Both readings are slowing their pace of increase while still below their respective cycle averages. This is not good news if there is any expectation of strong recovery in Europe. Germany may be contributing to the slow down since its own program to stimulate car purchases has wound down. Other nations also had a car sales promotion programs that have wound down. So maybe some of the slowing can be explained away. But that still leaves a question about what will speed the pace of recovery back up. If the answer is ‘nothing,’ then the caveat does not amount to much. For now recovery remain is gear but it is slowing.

FLASH Readings
Markit PMIs for the Euro Area
  MFG Services
Nov-09 50.98 53.17
Oct-09 50.73 52.58
Sep-09 49.29 50.86
Aug-09 48.24 49.92
Segment averages
3-Mo 49.42 52.04
6-Mo 46.30 49.29
12-Mo 40.50 45.59
136-Mo Range
High 60.47 62.36
Low 33.55 39.24
% Range 64.7% 60.3%
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