MFG Is At Strong Diffusion Levels Across MOST of EMU

The chart shows that EMU countries had completed much of their recession rebound according to the diffusion indices by late 2010; after some minor weakness, indices have moved up to even stronger levels. The EMU PMI gauge overall and in many EMU member countries is at highs since March of 2000. EMU, Germany, Austria, Ireland and The Netherlands are at highs. Other countries are either solid or moderately strong; only Greece among these reporters is weak –and it is very weak. Moreover, Greece alone saw its MFG sector weaken from January to February and in fact Greece’s MFG sector has weakened for three months in a row. France broke a similar weakening streak this month.

The PMI data do not assess the degree of rebound but rather are breadth indicators. For example while Germanys PMI is at its high since 2000, Germany's IP level as of Dec is 'only' 93% of past cycle peak compared to 90% for France, 80% for Italy, and 77% for Spain. The degree of recovery in that sense still has a ways to do. What we do see is that the breadth of the MFG expansion across various EMU countries is generally good-to-excellent. Of course, as we just demonstrated, the level of industrial output has not been restored to prerecession levels but in the sense of breadth in the recovery is now solid and is about as strong as it gets.

Markit  MFG Indices   Feb-11 Jan-11 Dec-10 3Mo 6Mo 12Mo %-ile Euro-13 59.02 57.29 57.11 57.81 56.17 56.21 94.6% Germany 62.73 60.54 60.71 61.33 58.96 59.32 100.0% France 55.66 54.90 57.18 55.91 56.13 55.78 69.4% Italy 59.00 56.61 54.73 56.78 54.64 54.29 96.3% Spain 52.14 51.96 51.46 51.85 51.07 51.43 81.5% Austria 61.92 60.29 57.66 59.96 57.88 58.02 100.0% Greece 42.77 42.83 43.05 42.88 43.47 43.31 21.7% Ireland 56.66 55.75 52.24 54.88 52.52 52.49 100.0% Netherlands 60.67 57.51 57.49 58.56 56.75 56.47 100.0% Percentile is over range since March 2000