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Economy in Brief

EMU PMIs Show Improved Services and Slightly Weaker MFG - as Covid Strikes Again
by Robert Brusca  November 23, 2021

A surprising improvement in the composite
Of the fifteen PMI readings offered for the countries in the table 10 strengthen on the month and five weaken. Looking at the two sectors there is weakening in the US service sector the UK service sector and in German manufacturing with improvement elsewhere in EMU MFG and services, in German services, in French MFG and Services, and in UK and US MFG.

The month's readings and the sequential trends hint at a transition or a disconnect in progress. Among the five entities reporting with two sectors and a composite each, all show improvement over 12 months and dial show improvement over 6-months compared to 12-months - that is all but the US that logs weaker results for all entries. Over 3-months all show deterioration except for the US manufacturing sector that improves. In the current month, as shown above, conditions are mixed but tend to 'better' with the EMU Area, Germany and France mostly lagging strong readings and the UK and the US. Showing split sector performance with weaker services and stronger manufacturing.

The Covid19 re-run
Even at the cinema the sequel is always different from the first-run movie. With this most recent Covid recirculation that is true as well. In the case of Covid19 we now 'know the disease better.' We more-or-less know what to do. We have vaccines and drugs to aid treatment or to enhance prevention and recovery. But none of these tools is as effective as vaccines were in the early stages of the first round.

According to a Bloomberg report...
Vaccines no longer protect as well against infection but do help mitigate symptoms- Covid-19 vaccines remain highly effective at keeping people alive and out of the hospital, but new U.S. data add further support to the argument that the shots aren't preventing infections as much as they once did. Unvaccinated people were about five times more likely to test positive for the virus than the vaccinated in the week starting Sept. 26, down from about 15 times more likely in May, according to the latest age-adjusted data from the Centers for Disease Control and Prevention, which were updated Monday.

This explains some of the angst among people as there are protests in Europe against some of the new demands for lockdowns. While booster shots are being touted the booster is just that and not a new defense against the Delta-variant per se. However, the vaccine does help to quell the impact of the virus on your body if you do get infected. And yet, a number of studies show, that vaccinated people now tend to get infected more (even on a per capita basis!) than those who are not vaccinated..

There also are various experimental pharmacological solutions and there are some controversial treatments for Covid19 that still have not been fully tested. There are remedies that boost the immune system (which is now all that the 'vaccines' can say that they do!). There are a number of drugs and procedures that we have and that are in progress to treat Covid. Yet worldwide only a few of the drugs are being tested and vaccines are being made to bear the brunt of the work despite their substantially less effective role this time around. I find it strange and illogical that more effort is not devoted to pharmacological approaches.

Against that background it is surprising that the service sector does better in Germany, France and in EMU. But it may be that the outbreaks are too recent to have hit the economies hard - just yet. Once again, we have to temper our proclivity to identify economic trends and go with them as a forecast. We know the virus to be an authentic trend-killer.

Still... PMI readings revel strength
The percentile standings of the Markit PMI data remain strong. The composites show rankings of 77.4% (EMU), 77.4% (France), 88.7% (UK), (81.1%) US. Only Germany has a composite that is below its historic median at a standing below 50 at 47.2%.

The rank standings still shows a high standing for services (averaging 79.2% for this group) compared to Manufacturing (73.6%). The fact that the virus is recirculating and that new policies are being put in place should affect the service sector the most. Instead - at least for the moment - the service sector is the relative strongest.

Looking ahead I would expect to see weaker service sector numbers in Europe because of the virus re-boot. After that who knows? The future is still clouded by the virus as well as the need to shift away from stimulative monetary and fiscal policies.

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