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Economy in Brief

No Surprise:Manufacturing New Orders for the Total Euro Area Decline
by Louise Curley  September 24, 2007

The July weakness in manufacturing new orders for the entire Euro Area is hardly a surprise. Earlier releases of data on new orders for several of the member countries were pointing in this direction. The index of new orders for manufacturing in the total Euro Area declined 4.1% from 134.2 (2000=100) in June to 128.8 in July. Most of the decline took place in foreign orders. Domestic orders declined 0.2% while foreign orders fell by 10.0%. Total, domestic and foreign new orders are shown in the first chart.

The rise in the euro has undoubtedly affected foreign orders. From the end of 2005 to the end of July of this year, the euro has risen 16% against the dollar. It has since risen a further 3% and reached an all time high of $1.409 last Thursday. The daily values of the euro in US dollars since the end of 2005 are shown in the second chart.

New orders for consumer goods actually rose 1.1% in July from 122.6 to 124.0. But this increase was more than offset by an 8% decline in orders for capital goods. Data on consumer and capital goods orders are shown in the third chart.

EURO AREA INDEX OF MANUFACTURING NEW ORDERS (2000=100)  Jul 07 Jun 07  Jul 06  M/M Chg  Y/Y Chg  2006 2005 2004
Total 128.8 134.2 119.2 -4.1 8.0 119.2 109.2 104.0
Domestic  119.3 119.5 110.7 -0.2 7.8 111.1 103.6 101.8
Foreign 140.6 157.3 130.5 -10.0 8.4 131.5 118.3 109.8
Capital Goods Orders 131.0 142.3 119.8 -8.0 9.4 119.5 111.0 105.2
Consumer Goods Orders 124.0 122.6 115.0 1.1 7.8 116.7 110.0 109.3
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