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Economy in Brief

Euro Area Orders Drop Sharply in May
by Robert Brusca July 23, 2008

The domestic and foreign orders trend lines now both have discernable downtrends. Growth rate calculations over the key sequential periods also show that declines are becoming more intense in both sectors. Over three months, for example domestic orders are dropping at an 11% pace while foreign orders are dropping at an 18% pace. Yr/Yr domestic orders are flat while foreign orders are off by 2.5%. Sales trends are losing momentum as well but only for intermediate goods is the trend negative over three months (flat Yr/Yr).

The Euro-Area result is the weighted average of the country results. All thee of the largest Zone countries have orders lower over three months: Germany France and Italy. Yr/Yr France is down the most followed by Italy with German orders still up over 12-months but by less than one-percent.

The slowdown in the e-zone is now undeniable and with orders turning negative Yr/Yr the potential for something deeper than a slowdown is in the works. The IMF’s John Lipsky has said that the euro is now overvalued. The EMU community is being squeezed by a too –strong euro rising interest rates high inflation (due to just a few items with spiking prices however) and a slowing global economy. Through all of this, EMU growth has been supported by strength in capital goods output. That is now fading. Consumption remains weak. Thus there is little to cushion the economy from the slowdown emanating from the capital goods side. Europe’s weakness and slippage is a real phenomenon and it is echoed by earlier surveys form Zew and the IFO.

Euro Area and UK Industrial Orders & Sales Trends
Saar except m/m % m/m May
08
May
08
May
08
May
07
May
06
Qtr-2
-Date
Euro Area Detail May
08
Apr
08
Mar
08
3Mo 6mo 12mo 12mo 12mo Saar
MFG Sales 0.6% 0.4% 0.1% 4.2% 8.2% 5.1% 6.4% 7.9% 4.9%
Consumer 0.2% 0.1% 0.0% 1.3% 1.6% 2.4% 6.4% 7.9% 1.2%
Capital 0.2% 0.3% 0.3% 3.4% 5.3% 5.2% 4.3% 4.0% 3.9%
Intermediate -5.5% 4.6% -1.9% -11.4% -8.9% 0.0% 8.3% 7.1% 3.4%
MFG Orders
Total Orders -3.5% 2.0% -1.0% -9.8% -8.3% -1.0% 8.2% 12.1% -2.2%
E-13 Domestic MFG orders -5.5% 4.6% -1.9% -11.4% -8.9% 0.0% 3.8% 11.3% 2.8%
E-13 Foreign MFG orders -3.9% -0.4% -0.7% -18.3% -14.7% -2.5% 10.9% 15.2% -13.6%
Countries: May
08
Apr
08
Mar
08
3Mo 6mo 12mo 12mo 12mo Qtr-2
-Date
Germany: -1.3% -1.0% -0.8% -11.8% -9.2% 0.7% 12.5% 13.3% -10.3%
France: -4.6% 4.5% -6.6% -24.6% -9.2% -4.5% 8.8% 4.5% -8.8%
Italy -3.1% 0.5% -0.9% -13.4% -8.2% -1.1% 6.9% 13.6% -4.4%
UK (EU) -9.3% 20.6% -14.1% -22.1% -5.5% 4.8% 3.9% 3.1% 1.1%
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