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Economy in Brief

Euro Area IP Trends Point Lower
by Robert Brusca July 14, 2008

Even capital goods output trends in Europe are begging to look strained. Manufacturing IP is in its first decline since May of 2005 on a Yr/Yr basis. The month-to-month 1.4% output drop is the largest since Sept 2007. The drop is spread liberally across EMU members especially large countries including German where output is off for three-months in a row. France, Italy, Spain and the UK each have MFG output lower yr/yr; in Germany it is still up but only by 0.9%.

In the current quarter MFG IP is dropping at a 3.3% annual rate. Consumer goods output is off sharply. Intermediate goods output in falling. Capital goods output is still rising in Q2 at a thin 0.6% annual rate.

The euro currency seems to be doing some backtracking. Not only has the ‘rescue package for Fannie Mae and Freddie Mac, two large US ‘GSEs,’ (Government sponsored enterprises) helped to buoy the dollar but so has this news of encroaching weakness in Europe. Europe has been in denial about its weakness (with a few exceptions) for some time. Part of this has been due to a need to show a common front in backing the ECB. Admitting that the wheels were coming of the economy would have been no way to support the ECB in its plan to hike rates.

But with that done talk has turned quickly to how that hike could be undone. Bill Gross of PIMCO, a long term dollar bear, has changed his mind. Several high profile Wall Street strategists who had recommended US companies with large foreign sales have thrown in the towel as not only did that strategy not work it seems to have fewer prospects to work with going forward. Europe is weakening and reality is dawning slowing on a broad front with today’s report.

Euro Area Manufacturing IP
Saar except m/m Mo/Mo May
08
Apr
08
May
08
Apr
08
May
08
Apr
08
 
Ezone Detail May
08
Apr
08
Mar
08
3Mo 3Mo 6mo 6mo 12mo 12mo Q-2-
Date
MFG -1.4% 0.5% -0.7% -6.4% -0.7% -0.7% 1.0% -0.2% 2.9% -3.3%
Consumer -1.8% 0.7% -0.9% -7.6% -2.8% -3.3% -1.3% -2.9% 0.4% -4.4%
Consumer Durables -3.3% 1.9% -2.0% -12.6% -0.5% -3.7% -1.2% -5.0% 1.0% --
Consumer Non-Durables -1.2% 0.0% -0.6% -6.9% -3.8% -3.2% -1.4% -2.5% -0.1% --
Intermediate -1.4% 0.4% -0.6% -6.1% 0.1% -0.1% 0.7% -0.4% 2.5% -2.9%
Capital -2.4% 2.4% -1.7% -6.9% 4.2% 0.9% 5.4% 2.6% 7.6% 0.6%
Main Euro Area Countries and UK IP in MFG
  Mo/Mo May
08
Apr
08
May
08
Apr
08
May
08
Apr
08
 
MFG Only May
08
Apr
08
Mar
08
3Mo 3Mo 6mo 6mo 12mo 12mo Q-2-
Date
Germany -2.6% -0.3% -0.3% -12.2% -2.2% -1.9% 3.0% 0.9% 5.5% -8.3%
France: IP excl Construction -2.6% 1.5% -1.1% -8.8% 3.5% -1.7% 0.4% -1.2% 3.1% -2.0%
Italy -1.5% 0.3% -0.2% -5.3% 0.4% 0.9% 1.0% -2.7% -0.5% -2.6%
Spain -14.6% 27.5% -16.9% -32.9% 39.8% -9.5% 11.8% -7.4% 12.0% 26.7%
UK -0.6% 0.1% -0.5% -3.8% 0.0% -0.8% 0.2% -0.8% 0.0% -1.8%
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