Following today’s release of European manufacturing PMI data we are sadly no closer to getting any resolution on which way the great US-European divergence will compress. Because all we learned is that, very much as expected, Europe managed to contract for a fifth month in a row, with the average PMI in Q4 2011 the weakest since Q2 2009, essentially guaranteeing a sharp recession once the manufacturing slow down spills over to GDP. The only silver lining was that the contraction across the continent was modesty better than expected, however if this merely means that the band aid is being pull off slowly and painfully instead of tearing it off is up for question.
The released December manufacturing PMIs were as follows:
- Italy: 44.3 vs 44.0 previously, exp. 43.8
- France: 48.8 vs 47.3 previously, exp. 48.7
- Germany: 48.4 vs 47.9 previously, exp. 48.1
- Greece: 42.0 vs 40.9, nobody cared about expectations as the economy is total freefall
And the consolidated Eurozone PMI number came at 46.9, just a tad higher than the 46.4 in November, and in line with expectations.
The worst news, as Reuters reports below, is that New Orders are dropping at a faster pace than output cut, meaning the contraction is back end loaded and more deterioration is imminent.
But first visually, Europe’s Industrial Production is still lagging the slowdown in manufacturing. Expect this compression to also collapse, likely in an adverse fashion.