PMI Reverses as Manufacturing Improves and Services Weaken in EMU

PMI gauges for the European Monetary Union show that the manufacturing sector that has been very weak is gaining some strength while the services sector that has generally had higher PMI values is eroding- it, in fact, has weakened for two months in a row. The aggregate statistics are now showing relatively weak standings for both manufacturing and services. Comparing the reporting units in the table, we see that among the eight reporters four of them have stronger queue percentile standings for manufacturing and four of them have relatively stronger queue percentile standings for services. The unweighted average of these shows the manufacturing average at a 40.8 percentile standing with services at a 42.1 percentile standing. Both of them were standings below the 50% mark meaning that for both of them performances below their median performance for the last four-plus years.

Monthly patterns The monthly data show, again I'm looking at the unweighted average of the eight-reporters in the table, that the composite reading has only very gradually deteriorated from 51.5 in December, to 51.4 in January, to 51.2 in February. This is a lot more like stasis than it is like weakening. The data showed that manufacturing has been creeping higher from a diffusion rating of 47.6 on an unweighted basis in December to 49.1 in January and 49.2 in February that contrast with services. For the December reading, services log a reading of 52.8, that gives way to 52.0 in January, and to 51.7 in February. Manufacturing is firming and services are easing although in percentile standing terms there's very little difference between the relative standings of the two sectors; however in diffusion terms services continue to be the sector above 50 which means that activity is expanding in services where manufacturing is closing in on 50 but doing it from below, indicating that the manufacturing sector is still contracting but contracting and ever slower pace. And, of course, the services sector is the job creating sector.

The beat goes on…faint as it is None of these observations are particularly encouraging or particularly depressing except that there has generally been economic underperformance and as far as that's concerned the beat goes on. There is fairly broad improvement going on in Australia, Japan, and Germany, but otherwise conditions are quite mixed on a monthly basis.

Broader trends Turning to the sequential changes from 12-months to six-months to three-months, we see that most reporters compared to 12-months ago are doing better. The PMI headline or ‘Composite Index’ is weaker compared to a year-ago only in Japan and in Germany. However, over six months the composites are weaker for all reporters except the United States. Over three months, there's a weaker composite in four reporters and a stronger composite in four reporters. Weakening over three-months compared to six-months is the European Monetary Union, France, the United Kingdom, and Japan. Strengthening on that comparison are Germany, Australia, India, and the United States.

The queue percentile standing data, which are ranking data, show composite standings above the 50% mark which means standings are above their medians in India, Japan, and Australia only.... The unweighted queue percentile standing averages are all in their low 40th percentiles.

With international relations in a stir over the recent actions of the Trump Administration, the outlook remains clouded.