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A booming factory sector, even in Europe

March 25, 2021

chart depicting the spread between the Eurozone's manufacturing and services purchasing managers indicesSource:  IHS/Markit

The flash IHS/Markit manufacturing PMI for the U.S. came in largely in line with expectations in March, ticking up to 59.0 from a prior 58.6. This marks the eighth straight month of expansion and the fifth reading in a row ahead of the peak from the last cycle. Manufacturing remains a stalwart (note as well last week’s enormous increase in the Philly Fed index) and a reflection on the enduring strength of the broader recovery.

This is also a global story. The eurozone’s manufacturing PMI shot up to a record 62.4 in March and is now up by 7.6 points in just the last two months. While the European economy at large remains listless due to a botched vaccine rollout, a still-elevated case count, and recurrent lockdowns, the lofty PMI is a hint that it is benefitting from improvements externally. And while the tailwinds are not quite as pronounced in Europe as they are in the U.S. – note that while the Fed and ECB balance sheets are now growing at roughly the same pace, the U.S. fiscal response has been much stronger than that in any country in the currency zone – the jump in the PMI is also a signpost that it is poised to expand at an outsized pace for a time once it finally gets the pandemic under control.

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