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Economy in Brief

Euro Area IP Slows on Broad Front 
by Robert Brusca January 14, 2008

Industrial output is dropping in November and more than offsetting the rise in October that followed another drop in September. The chart shows that while industrial output trends are ragged across sectors they are also losing momentum. Main EMU sectors are lower in November and in the quarter-to-date (see table, final column). Still for two of the three largest Euro Area countries, France and Germany, IP was still advancing in Q2 even though it did fall in both those countries in November. Spain’s sharp rise is no surprise since the Spanish data are extremely volatile. The UK, an European Union member, shows a slight drop in output in November and small decline two months into the fourth quarter as well.

On Balance, the talk for Euro Area suggests that growth is not the main worry there, while inflation is becoming more of a worry, unlike the US cycle. Recent reports show that the 3-Month LIBOR premium over the US discount rate has been evaporating as the successive TAF auctions have been completed. So Europe may have less of a sense of risk form the financial crisis that welled up related to sub-prime loans and more at the end of last year. Still that is different from saying that growth prospects there have improved. This morning the Euro was strong and headed toward a new high vs dollar. It made a new high vs sterling. Surely with the impact for such shifts in the pipeline growth in the E-zone will not be enhanced. Nonetheless more of the ECB members seem to be leaning toward agreeing that it is time to hike rates.

E-zone and UK IP and MFG
Saar except m/m Mo/Mo Nov-07 Nov-07 Nov-07  
Ezone Detail Nov-07 Oct-07 Sep-07 3-Mo 6-mo 12-mo Q-2-Date
Manufacturing -0.6% 0.5% -1.3% -5.4% 1.0% 2.2% -1.3%
Consumer Goods -0.2% 0.2% -1.4% -5.6% 0.1% 1.3% -1.8%
Consumer Durables -1.9% 0.0% -3.7% -20.5% -4.5% -3.1% --
Consumer Nondurables 0.1% 0.1% -1.2% -4.1% 0.8% 2.2% --
Intermediate Goods -0.6% 0.6% -1.4% -5.8% 0.6% 2.1% -1.5%
Capital Goods -0.7% 0.9% -1.3% -4.1% 4.0% 3.9% 0.7%
Main E-zone Countries and UK IP in MFG
  Mo/Mo 104.8 104.8 104.8  
Memo: Manufacturing 1-Mo% 1-Mo% 1-Mo% 3-Mo 6-mo 12-mo Q-2-Date
Germany -0.9% 0.2% -0.1% -2.9% 2.7% 4.5% 2.0%
France: IP excl Construction -1.5% 2.1% -1.3% -3.0% 0.8% 2.5% 2.5%
Italy -1.4% -0.6% -1.7% -13.9% -5.3% -3.9% -9.3%
Spain -6.2% 10.2% -6.8% -13.6% -7.7% -0.7% 13.2%
UK -0.1% 0.3% -0.7% -1.9% -0.2% 0.1% -0.2%
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