Recent Updates

  • Serbia: Bank Claims, Banking Survey (Apr)
  • UK: Average Precipitation (Apr)
  • Italy: ISTAT Business & Consumer Survey (May-Press)
  • Spain: Credit Institutions Balance Sheet (Mar)
  • Hungary: Labor Force (Apr)
  • more updates...

Economy in Brief

A rose is a rose is a rose (Existentialism) Arroz es arroz es arroz (Rice is rice) MFG is MFG is MFG (The law of global linkages)
by Robert Brusca April 2, 2007

As you can tell from the chart on the left the sense of there being separate business cycles in the US and in Europe is a sort of joke. The US and Euro area manufacturing indexes are plotted on top of one another and their sense of co-variation is unmistakable. Also the US is shown to be the male and E-zone is the female; that is to say, if we regard this as a dance, the US leads.

In the recent mini-cycle, Europe has struck out a bit on its own. A US up-cycle from mid-2005 aborted early, turning to decline. Meanwhile, Europe has continued to expand and only recently has hit a plateau with hint of erosion. In the US, the down-cycle is only showing early signs of stabilization.

We wonder if Europe needs the US more than the US needs Europe?

The table above shows hath the E-zone readings, while off peak, are still very high in the range they have occupied since Mid-1997. The overall index is in the top 30% of its range and stands 6% above its average. Orders are similarly strong. Supplier deliveries are showing the weakest relative performance 10% below their average of the period.

        Placing NTC Euro-Zone Readings in their Respective Ranges
  Since June'98
NTC E-zone Current Std Dev Average SD% Avg MAX MIN Range Percentile % of AVG
NTC Index 55.4 3.8 52.5 7.3 60.5 42.9 17.5 71.1 106
New Orders 56.4 4.6 53.5 8.7 62.4 41.0 21.4 72.3 105
Backlogs 53.9 3.1 52.0 5.9 57.6 47.2 10.5 64.1 104
Production 57.4 4.2 54.2 7.7 62.8 43.0 19.9 72.8 106
Supplier Deliveries 42.5 4.8 47.2 10.1 56.9 34.7 22.2 35.1 90
Inventories 48.7 1.0 48.3 2.0 50.4 46.2 4.3 58.9 101
Prices (Pd) 66.1 9.8 59.7 16.4 76.5 37.7 38.8 73.3 111
Employment 52.9 2.9 49.8 5.8 56.0 44.2 11.8 73.9 106
New Export Orders 55.3 4.3 52.8 8.1 60.0 39.4 20.6 77.5 105
Note: From June 1997 to Date; except back logs since Nov '02

The leading components of the NTC E-zone index are showing mixed trends. We form these trends as the difference between the 3 month and six month indexes. Supplier deliveries and prices-paid are turning up while new orders and order backlog trends are eroding.

On balance, we can see the strong US-Europe linkages or commonalities. The history looks as though the US cycle gets transmitted to Europe, but Europe is recently showing some independent strength. However, it is also showing some sign of decay. It hardly seems as though a further rise in the Euro can do any good for Europe. But, so far so good.

large image