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Economy in Brief

Better Manufacturing Sector Prospects in Europe and the UK
by Carol Stone February 22, 2006

Yesterday in this space, Louise Curley noted a "stunning" rise in new orders at French factories in Q4 2005. That commentary followed a similar sentiment about orders in Italy for December, which were reported Monday. Now today, Eurostat tells that new orders for the Euro-Zone as a whole closed out 2005 with two upbeat months. Total orders gained 4.6% in November and 5.0% in December (month-on-month, seasonally adjusted). Foreign orders rose 9.5% in November and 8.8% in December. For the year as a whole, foreign orders were 9.0% higher than in 2004 while total orders were up 4.8%.

The results of France INSEE's monthly business survey hint of further improvement early this year. Total orders had diffusion index readings of -12 and -8 in January and February, respectively, a far cry from the -20 range that prevailed in mid-2005. Export orders ran up from -5 in January to +8 in February, the first positive reading since March 2001. The anticipated trend in industrial production is hovering just below zero, also much less weak than the -26 found in June of 2005 and the -12 average for the year.

Across the Channel, the UK also still sees more firms with falling orders than rising, according to the Confederation of British Industry monthly survey, but these negative numbers are diminishing. February's total orders stood at -18, compared with -28 in January and a -21 average for all of last year. Export orders fell back from -10 in January to -17 in February, but they had stood at -23 in December and had also averaged -21 for all of 2005. Expectations for near-term output show it at +10, the highest monthly reading since February 2005.

The trends in these factory prospects look uneven and the still sluggish domestic sectors disappointing. But persistent gains in exporting can help turn that around.

  Feb 2006 Jan 2006 Dec 2005 Nov 2005 2005 2004 2003
Euro-Zone Total Orders (% Change) -- -- 5.0 4.6 4.8 6.1 0.1
Foreign Orders (% Change) -- -- 8.8 9.5 9.0 7.9 0.6
France INSEE Survey, Industrial Production Trend -3 0 -2 0 -12 5 -29
   Export Orders 8 -5 -9 -7 -14 -10 -21
UK CBI Survey Orders -18 -28 -22 -25 -21 -9 -29
   Export Orders -17 -10 -23 -13 -21 -13 -33
Output Next 3 Months 10 1 -4 -4 4 12 -3
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