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Economy in Brief

Euro-Area US and UK MFG Sectors Weaken
by Robert Brusca  June 1, 2011

The chart shows the weakening trends in the level of the EMU MFG PMI and the UK PMI. The UK is falling off sharply over the past few months but the drop this month was the sharpest in Germany and in Ireland.

The Greece, the UK and Spain are off the most from their respective cycle peaks, by about 10 points. France is holding near it its peak falling off by about three points from its cycle peak.

Greece's weakness can be seen in its MFG standing. It is up only 6 points from its cycle low value and stands in the bottom 12.9% of its queue of historic values. While Spain is up by over 19 points from its cycle low, a substantial rebound from that low, it still sits in only in the 23rd percentile of its historic queue.

Germany and France stand in the 79th and 78th percentiles of their respective queues. Austria stands in the 78th percentile of its queue despite having fallen substantially for three months in a row.

Over three months the UK has seen its MFG index fall the most, by 8.98 Points. Italy and Austria's PMIs have fallen by over six points each over three-months.

Still, of the countries in the table only Greece at 44.5 and Spain at 48.2 have MFG PMIs that are below the level of 50 and show contraction. Next lowest are the UK and Italy with standings in the 52nd percentile.

What we see as a trend is that Europe is slowing. The EMU nations are seeing MFG slow. The UK is seeing MFG slow. And in the US the MFG sector has been slowing. There is a global MFG slowdown in train. Generally the services sectors have been in train for this slowdown as well. Since MFG has been leading the global expansion there is some concern as to the cause and the longevity of this slowing.

We know there is a supply shock from Japan. Europe has some added angst over its ongoing debt issues that have swept up Greece and Portugal and currently embroil Ireland and threaten Spain and where the IMF has warned that the contagion could spread to the core of the Zone. So the slowing has some elements that are of a one-time time nature, such as the Japan supply-shock situation and others that are potentially more long lived, like the debt bomb.

The slowdown has been transmitted across the Atlantic as well. The global economy is linked up and we need to pay close attention to how severe this slowing will be. We can see that this month we are full bore in slowdown mode and the braking is not letting up.

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Changes in Markit MFG Indices
  Changes Mo/Mo Change on Frequency      
  May
11
Apr
11
Mar
11
3Mo 6Mo 12Mo From
Peak
From
Low
%ile on
Level%of Q
Euro-13 -3.30 0.45 -1.52 -4.37 -0.68 -1.19 -4.4 21.1 72.7%
Germany -4.23 1.03 -1.80 -5.00 -0.37 -0.70 -5.0 25.8 79.5%
France -2.56 2.15 -0.30 -0.71 -2.97 -0.83 -3.0 20.1 78.0%
Italy -2.70 -0.69 -2.77 -6.16 0.88 -1.18 -6.2 18.3 68.2%
Spain -2.37 -1.07 -0.50 -3.94 -1.82 -3.31 -9.0 19.7 23.5%
Austria -1.38 -3.63 -1.30 -6.31 0.38 -2.61 -6.3 22.5 78.0%
 Greece -2.24 1.37 2.61 1.74 0.62 2.71 -10.8 6.3 12.9%
Ireland -4.23 0.37 -0.98 -4.84 0.65 -2.26 -4.8 18.6 53.0%
Netherlands -4.08 1.08 -2.55 -5.55 -1.42 -1.38 -5.6 19.7 67.4%
EU
UK -2.29 -2.01 -4.68 -8.98 -5.42 -5.60 -9.5 16.9 57.6%
percentile is over range since March 2000
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