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Economy in Brief

EMU PMIs back off in September
by Robert Brusca  October 5, 2011

The chart demonstrates that the MFG sectors in the across EMU are very tightly connected. The have very similar cycles to the US, too and as the MFG sector begins to sag in this now-weakened recovery period we are seeing the swale in the profile of each series. The world economy is indeed very integrated and it is a good reason to wish your neighbor well and to worry when he has trouble, such as Europe now has over its troubled borrowers and banking sector.

The European service sector is beginning to waver under the decline in its MFG sector and other strains. We document that with the data in the table above. The service sector index has slipped for six straight months. It registers a decline in activity in September (value below 50) for the first time this year. Germany, Italy, and Spain each register drops in service sector activity in September.

Services reflect the weakness in consumer confidence which is also very weak across EMU. Consumer attitudes have been eroding across this group of countries in a very consistent fashion.

Consumer confidence stands at the 14th percentile of its queue in September- that is, it is weaker than its September value only 14 percent of the time. The EU services sector ranking is also in the 14th percentile of this queue. By country, consumer confidence is only near ‘okay’ in Germany where it stands in the 72nd percentile of this queue. In Spain consumer confidence is in the 34th percentile of its queue. In France, Italy and the UK the confidence queue-standing by the consumer is in single digits.

Clearly Europe and the US are slipping and as they lose balance they hold onto one another and only lose their balance more. If one of them were on solid footing that might work. But in the US Republicans and Democrats are at loggerheads while in Europe it is the EU/MEU members that have irreconcilable differences and the two economies falter partly in response.

Various looks at the UK, EU and EMU Services Sector
  Sep-11 Aug-11 Jul-11 3Mo 6Mo 12Mo %ile
Euro-Area 48.84 51.48 51.58 50.63 53.06 54.26 44.8%
Germany 49.69 51.08 52.89 51.22 53.87 56.39 42.6%
France 51.47 56.84 54.19 54.17 57.34 57.22 49.6%
Italy 45.81 48.36 48.61 47.59 48.76 50.36 33.2%
Spain 44.76 45.20 46.51 45.49 48.00 48.16 51.4%
Ireland 51.35 51.07 51.74 51.39 51.21 51.37 56.9%
EU only
UK (CIPs) 52.85 51.15 55.45 53.15 53.57 53.46 62.4%
percentile is over range since May 2000; Ireland has not reported a Jul #, we use June
EU Commission Indices for EU and EMU
EU Index Sep-11 Aug-11 Jul-11 3Mo 6Mo 12Mo %-ile
EU Services -4 -1 6 -15.67 -13.17 -11.83 42.9%
EMU Sep-11 Aug-11 Jul-11 3Mo 6Mo 12Mo %-ile
Services 0 4 8 4.00 6.83 8.33 50.0%
Cons Confidence -19 -17 -11 -15.67 -13.17 -11.83 42.9%
Consumer confidence by country
Germany-Ccon -2 0 8 2.00 5.50 7.33 70.5%
France-Ccon -28 -26 -18 -24.00 -21.00 -19.58 22.5%
Ital-Ccon -31 -29 -27 -29.00 -26.83 -25.17 2.9%
Spain-Ccon -17 -17 -13 -15.67 -16.00 -18.25 66.0%
UK-Ccon -22 -20 -18 -20.00 -19.33 -19.58 34.2%
percentile is over range since May 2000
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