EMU manufacturing In Slight Backtrack

The EMU region saw its manufacturing PMI from Markit drop to 51.1 in September from 51.38 in August. This small set back still leaves the gauge on an improving trajectory, but on a mild trajectory.

Monthly set backs were seen in Germany, Italy, Spain, Austria, and Greece. Continuing to improve in the month were EMU members France, Ireland and the Netherlands.

Even the hot EU member, the UK, took a set back to its improving trend in Sept.

But the trend appears more clearly when looking at the changes over three-months or over six months as well as over one year. All early-reporting EMU members in the table show improvements on each of those horizons.

France has improved the most over 12-months with Spain, Austria and Greece next, in that order. Ireland has the smallest increase over 12-months, against the fourth largest gain over three-months.

The EU (only) sphere, finds Sweden and the UK have been making huge improvements over 12-months, logging increases in their respective PMI indices for manufacturing of 11.5 and 8.3 points- well in excess of the best EMU member (France) that saw an increase of seven points.

With all this good news in train it's important to remember where these countries are in the grand scheme of things. The EMU manufacturing gauge stands only in the 51.3 percentile of its historic queue. In the queue the median value sits at the level `50.' The EMU is barely above the midpoint of its queue of historic values. Germany may be the `strong man' of Europe but compared to its historic setting it stands only in the 52nd percentile of its historic queue. The relative BEST EMU members are the Netherlands at the 78th percentile of its historic queue and Ireland in its 73rd percentile. EU member the UK stands in the 92nd percentile of its own historic queue. Switzerland stands in the 69th percentile of its queue.

At the other end of the spectrum, France stands in the lower 40th percentile of its queue, Greece is in the 34th percentile of its historic queue and Austria is struggling, standing in its 44th percentile.

Two lessons from this data set are (1) that Europe is improving but, (2) it has a long way to go. Both are important statements. The new pickup is good news and not to be ignored. However, the recent good news represents only a small portion of what yet has to be done to get back to normalcy.

The overall EMU manufacturing PMI has risen some 17.6 points from its cycle low. But it is still some 7.9 points from its cycle high. At its current level it is barely above its midpoint of historic values. And Europe still has many challenges and member disagreements over its next steps and ultimate direction to overcome. As hard as crisis has been on Europe, a harder road may yet lie ahead.