Service Sector In Europe Continues To Dig Out

The EMU services PMI rose for the fourth month in a row. The services index is above the 50 mark for the second month running. The services PMI is on a tear as it is surging up at least as fast as it had dropped in the recession. So far so good. Still it has not restored the pre-recession level of the services index. It remains pure speculation as to how fast or soon it will recoup its pre-recession level.

The Markit PMI readings are higher and stronger in their ranges than are their counterpart indices from the European Commission. The EMU index from Markit for the service sector is in the 59th percentile of its range since May of 2000. Over the same period the EU Commission services index is in its 31st percentile about half as strong in relative terms.

The same sort of shortfalls exist across countries

In the Markit framework all the largest countries’ services sectors score above the 50 (neutral) mark except Spain whose index still lags at 47.7. But in percentile of range terms it is Germany that is lagging and stands below the mid-point mark. Germany is doing well in absolute terms but it is not doing well relative to its past performance.

On balance the rise in the services sector is sharp and still seems to carry good upward momentum. This month among the larger countries only Germany backtracked. In the EU the UK’s reading is up to 56.9 and stands in the 82nd percentile (top 18%) of its range. The recovery across Europe is taking hold in the key services sector where most of the jobs are. It’s good news.