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Economy in Brief

EMU Orders Post Surprising Strength in April
by Robert Brusca June 26, 2008

The pecking order is disturbed
EMU orders are yet another example of enigmatic E-zone data. Country level performance is really uneven and this month the strongest economy (Germany) is showing the weakest results as EMU orders show unexpected strength. Can we believe it? I don’t think so.

Volatile orders with incongruent results
EMU orders have become volatile first of all and that argues against making any hasty judgments about trends. After a flat February and a 1.3% drop in March, orders have SURGED in EMU in April rising by 2.5%. This is with MFG sales rising m/m by 0.1%, 0% and 0.1% in each of the past three months. Moreover the gains are in intermediate goods the most strongly and secondly in capital goods. But capital goods strength is suspect as a trend since Germany dominates that category and in April German orders fell for the third month in a row.

Results of Biblical proportions: the first shall be last and the last shall be first
France and Italy are showing the greatest order strength over the past three and six months and this simply not a believable result as German orders have contracted. It is simply not credible as a trend, only as a fluke.

Domestic orders greatest in countries where domestic stress has been among the highest?
The order breakdown for the Zone shows that domestic orders are holding up the best, rising by 4.8% in April as foreign orders fell by 0.5%; Over three months foreign orders are off at a 6.6% pace, over six months they are down at a 1.4% pace. Meanwhile over that period EMU domestic orders have accelerated.

Too much of this report simply fails the credibility test
This is not a believable pattern. Domestically consumption has been hurt across the zone and banking sector problems linger. If the external sector is showing collapsing orders the EMU domestic economy will be having trouble as well. There may have been some domestic programs ion Italy and France that have sustained demand early in the second quarter, but it is nothing fundamental. In both of those countries the consumer sector is challenged and services surveys have been withering. It is hard to understand the spurt in EMU orders in April and that is no reason to believe it especially given the composition of orders across products and across countries. This is a report that is best set aside for a while to await revision or more context.

E-zone-13 and UK Industrial Orders And Sales
Saar except m/m Mo/Mo Apr
08
Mar
08
Apr
08
Mar
08
Apr
08
Mar
08
E-Zone Detail Apr
08
Mar
08
Feb
08
3Mo 3Mo 6Mo 6Mo 12Mo 12Mo
MFG Orders 2.5% -1.3% 0.0% 4.8% 4.0% 2.9% 3.5% 6.1% 2.2%
MFG Sales 0.1% -0.2% 0.6% 2.4% 7.4% 5.5% 5.2% 4.6% 4.8%
Consumer Goods 0.1% 0.0% 0.1% 0.8% 1.0% 1.4% 1.4% 2.4% 2.6%
Capital Goods 0.4% 0.4% 0.7% 6.2% 7.7% 6.1% 5.8% 6.0% 6.2%
Intermediate Goods 4.8% -2.1% 0.6% 13.7% 3.6% 6.1% 5.5% 7.5% 2.3%
Memo: MFG
Total Orders 2.5% -1.3% 0.0% 4.8% 4.0% 2.9% 3.5% 6.1% 2.2%
E-13 Domestic MFG orders 4.8% -2.1% 0.6% 13.7% 3.6% 6.1% 5.5% 7.5% 2.3%
E-13 Foreign MFG orders -0.5% -0.8% -0.5% -6.6% 9.7% -1.4% 4.5% 5.5% 3.9%
Countries: Apr
08
Mar
08
Feb
08
3Mo 3Mo 6mo 6mo 12mo 12mo
Germany (MFG) -1.1% -0.8% -0.1% -7.9% -3.6% -1.8% 8.9% 5.1% 5.5%
France (Ind) 5.2% -6.4% 1.6% 0.3% -0.7% 2.8% -0.3% 6.6% -1.2%
Italy (Ind) 1.2% -0.5% 2.2% 12.3% 18.2% 6.0% 1.1% 6.5% 4.0%
UK (Engineering Ind) 20.3% -14.2% -8.9% -22.0% -23.4% 30.2% -20.4% 13.0% -11.9%
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