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Economy in Brief

Orders Make Record Drop in Euro During October
by Robert Brusca December 22, 2008

A rapid deceleration…The sharp drop in the growth rate for orders in the current quarter is telling of the rapidity with which this slowdown has struck Europe. Orders in the fourth quarter are falling at annual rates of 50% in Germany, 57% in France, 37% in Italy and nearly 70% in the United Kingdom. This obvious bespeaks of a sharp slowing for growth in 2008-Q4.

Severe real sector hit… While the headlines have focused on the financial sector and banking problems and, although German consumer sentiment has been supported, the hit to EMU MFG has been severe. Both the EMU MFG and Services PMIs have taken sharp drops. These barometers precede the availability of authentic activity measures. The purchaser type surveys are merely ‘indicators’ While variables such as industrial output and retail sales are the actual results.

Orders are an actual forward-looking series… The orders series is also an actual result and not simply an ‘indicator’. Orders, while not actual activity are true figures corresponding to activity that been contracted ahead. The orders data are available for October but PMI data for December already are in hand –and they continue to be weak.

The recognition lag... It has taken some time but Germany seems to have come around to the idea of more stimulus. The drop in the HICP for the Zone (bringing the Yr/Yr headline pace to 2.1%) may also free up the ECB to become less tentative. Both orders and sales are all falling and orders are falling with uniform and shocking weakness across EMU. The dramatic policy moves and in the US have been rekindles euro FX strength. Is that a good sign or a signal how far behind Europe is in adopting needed stimulus? There should be no question about the severity of the weakness in Europe. It’s not just a banking problem.

E-zone and UK Industrial Orders & Sales Trends
Saar except m/m % m/m Oct
08
Oct
08
Oct
08
Oct
07
Oct
06
Qtr-2
Date
Ezone Detail Oct
08
Sep
08
Aug
08
3-Mo 6-mo 12-mo 12-mo 12-mo Saar
MFG Sales -1.3% -1.6% -0.8% -13.7% -6.7% -0.7% 5.5% 8.0% -14.6%
Consumer -0.2% -0.3% -0.2% -2.8% -2.2% -1.1% 5.5% 8.0% -2.9%
Capital -0.4% -0.5% -0.4% -5.0% -4.1% -0.5% 3.9% 4.6% -4.9%
Intermediate #N/A -5.6% -0.3% #N/A #N/A #N/A 7.3% 8.0% -15.6%
MFG Orders
Total Orders -4.7% -5.4% -1.6% -38.1% -26.1% -14.4% 8.8% 10.9% -42.1%
Countries: Oct
08
Sep
08
Aug
08
3-Mo 6-mo 12-mo 12-mo 12-mo Qtr-2
Date
Germany: -6.8% -8.0% 3.1% -38.9% -29.1% -16.4% 10.8% 9.1% -50.2%
France: -11.3% 0.4% -7.7% -54.3% -37.7% -18.3% 4.7% 10.9% -58.0%
Italy -5.4% -2.5% -1.9% -33.1% -18.6% -10.1% 6.1% 12.7% -37.8%
UK(EU) -28.3% 28.7% -8.6% -49.5% -42.4% -14.2% 5.0% 9.2% -69.9%
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