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Economy in Brief

Manufacturing on Slow Rise in Europe
by Robert Brusca  December 2, 2013

The PMI gauges for manufacturing in Europe show a pick-up in the manufacturing sector for EMU. Manufacturing output has snaked up to a reading of 51.62 in November from 51.30 in October. Half of the eight member countries in the table show manufacturing PMI improvement in November and half show declines. Germany, Italy Austria and the Netherlands show improvements in the month.

Only the Netherlands, Ireland, Austria and Italy post queue standings in their manufacturing PMI readings that are above the 60th percentile of their historic queue back to early 2001. But of these only the Netherlands and Austria have relatively strong PMI values. It is a testament to how contained MFG has been in EMU since the euro area was formed.

The six non-EMU member countries in the table are doing relatively better than the euro zone members as four of them have PMI standings at or above the 60th percentile of their respective queues back to early 2001. Only Sweden has a relatively weak queue standing, in the 46.8 percentile of its queue. However, the raw reading for Sweden is at 53.40, still above the average reading in EMU.

Looking at changes in the manufacturing indices within EMU, France and Spain are net lower over three months. For EMU as a whole, the current reading is net higher over three months but only by a thin 0.24 points. There is not only a good deal of disparity among PMI readings in the euro zone but also disparity on momentum. The strongest upward momentum over three months is from the Netherlands (+3.26) and Austria (+2.26).

Among the non-EMU countries two of six show net declines over three months: Sweden and Denmark. The strongest net gains in this group over three months are from Switzerland (+1.88) and Norway (+1.50).

The bottom line is that growth is in progress even though it is irregular. Looking back in the cycle, all EMU members are showing strong elevations of their PMIs from their respective cycle lows. Most member indices are more than twice the distance from their cycle lows as they are from their cycle highs. France and Greece are exceptions in this.

In September five of eight EMU members in the table showed declining PMIs along with a drop for the EMU overall. Just two months later in November only three members are contracting and the EMU overall is advancing. It is progress, but it is still slow, uneven and vulnerable.

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