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Economy in Brief

Market Indices For MFG Drop Sharply Off-Peak
by Robert Brusca June 1, 2010

The market MFG barometers for EMU fell across the bard in May. Only Ireland among the main reports showed a month-to-month boost and the EU’s UK edged higher. Greece the well-know troubled EMU ember shows what troubled straits it is in as it is the only example of a MFG PMI that is down over three-, six- and twelve-months. Moreover, every other EU/EMU report in the table is up by 20 index points (or almost) from its respective cycle low. Greece is not. Notably Greece’s MFG index is up by just 3.6 points from its low. The whole of the e-Zone is not even down that much from its cycle peak! Greece’s problems are not just problems with debt but are about problems in getting economic growth going and improving its tax revenues. The manufacturing sector has been leading EMU into recovery.

Today EMU unemployment was reported and it ticked up by 0.1%. In Germany the rate fell and the number unemployed fell by more than expected as Greece’s woes are helping German growth by having knocked down the value of the euro. Germany is benefitting from export strength. Still it is well recognized that Greece’s problems could become a net negative for the Zone. And, of course, Greece is not the only thing Europe is worried about.

Spain was downgraded by Fitch just before the weekend at the end of the US trading day. Over the weekend the ECB released estimates for the first time on the amount of bank loan losses that the Zone’s banking system probably faces. The ECB pointed to 195bln euros in loan losses for 2010 and 2011 saying that it could be worse if growth were hit hard. Add to this to the news of China slowing and we have a US-holiday shortened week that has just begun and already is jam-packed full of negative news. Welcome back!

Changes in Markit MFG Indices
  Changes Mo/Mo Change on Frequency    
  May-10 Apr-10 Mar-10 3Mo 6Mo 12Mo From Peak From Low
Euro-13 -1.69 0.90 2.42 1.63 4.66 15.18 -2.9 22.3
Germany -3.14 1.34 3.02 1.22 5.99 18.85 -3.1 26.5
France -0.77 0.08 1.59 0.90 1.38 12.46 -8.2 21.0
Italy -0.28 0.57 2.10 2.39 3.93 12.91 -3.6 19.4
Spain -1.80 1.46 2.75 2.41 6.23 11.68 -5.7 23.0
Austria -2.11 3.62 1.31 2.82 8.29 18.92 -2.1 25.1
 Greece -1.85 0.71 -1.26 -2.40 -5.45 -4.28 -14.2 3.6
Ireland 0.67 0.42 4.35 5.44 5.29 14.73 -1.3 20.9
UK 0.02 0.69 0.67 1.38 5.38 12.92 0.0 22.8
percentile is over range since March 2000
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