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Economy in Brief

EMU Orders: Still Sinking Fast
by Robert Brusca March 27, 2009

Egad! Still very weak: Euro industrial orders continued their steep rate of decline in January. The 3.4% mo/mo drop was less than the 8% plunge in December and the 9.4% stunner in November, but it fell far short of being reassuring.

Weak Q1 in train, too: The three month pace of decline is 57% at an annual rate. The rate of decline in the quarter is also at a -50% annual rate. So 2009-Q1 is not an encouraging number to look forward to at this point.

Imported weakness for Europe: The domestic/foreign split for orders is somewhat illuminating. Domestic orders fell at by 3.9% from December. Foreign orders fell by 7.3%. The pace of decline for past growth rates also shows that the domestic rate of decline has lagged the pace of the foreign orders decline. But that growth gap has become more pronounced this month with domestic orders off by so much less than foreign orders. Clearly the EMU is importing weakness from abroad. Its foreign orders and exports are falling at a faster pace than its domestic activity.

Dissent at home: While the ECB is coming under more criticism from business groups (today it is Business Europe, which represents national business federations and industry groups) the industrial orders data strongly suggest that the pulse of weakness is from beyond the ECBs border and reach. That does not mean that the ECB or that fiscal stimulus could not make up for it, but that there is a continuing drag of controllable influence on the euro-economy.

A glint or two of good news: Still, it is encouraging that the Markit PMI indices for services and for MFG turned higher in March. Today the CEPR index of activity echoed that signal and turned just a little bit less negative in March compared to February. This sort of statistic is not bankable but it is indicative of an economy that may be passing from its most severe phase of negative growth to a milder phase and perhaps eventually headed to recovery.

Looking ahead to March data… For the bulk of Euro-data the readings remain dispirited and grim. But the March reports which are so few in number have begun to stake out a less negative view. There it is: the precursor to a positive view. Not to get too excited yet, but this is the way that the rebound will start. So despite the discouraging data on the day the there is some good news in train but it’s only found in the freshest of reports. That means we are apt to see better news for COUNTRY level data first, since the EMU reports lag the timeliest of national reports.

E-zone-13 and UK Industrial Orders And Sales
Saar except m/m Mo/Mo Jan-09 Dec-08 Jan-09 Dec-08 Jan-09 Dec-08
E- AREA Detail Jan-09 Dec-08 Nov-08 3-Mo 3-Mo 6-mo 6-mo 12-mo 12-mo
MFG Orders -3.4% -8.0% -9.4% -57.9% -63.9% -50.1% -46.2% -32.0% -28.0%
MFG Sales #N/A -3.5% -3.9% #N/A -34.7% #N/A -24.0% #N/A -11.6%
  Consumer #N/A -0.4% -0.4% #N/A -4.9% #N/A -4.3% #N/A -2.9%
  Capital #N/A -1.7% -2.1% #N/A -20.3% #N/A -16.1% #N/A -8.7%
  Intermediate -3.9% -5.9% -8.4% -52.8% -56.1% -46.9% -40.8% -28.6% -23.8%
Memo: MFG                  
Total Orders -3.4% -8.0% -9.4% -57.9% -63.9% -50.1% -46.2% -32.0% -28.0%
  E-13 Domestic MFG orders -3.9% -5.9% -8.4% -52.8% -56.1% -46.9% -40.8% -28.6% -23.8%
  E-13 Foreign MFG orders -7.3% -7.1% -10.3% -64.4% -64.0% -56.2% -45.5% -37.2% -28.1%
Countries: Jan-09 Dec-08 Nov-08 3-Mo 3-Mo 6-mo 6-mo 12-mo 12-mo
  Germany (MFG): -7.6% -8.1% -7.5% -61.9% -61.3% -52.5% -46.3% -35.0% -30.3%
  France (Ind): -2.5% -2.0% -6.6% -36.6% -52.1% -44.6% -36.5% -28.0% -23.3%
  Italy (Ind): #N/A -2.0% -6.6% #N/A -47.2% #N/A -31.4% #N/A -18.4%
  UK (Engineering Ind): -25.2% 26.1% -11.9% -52.3% -33.0% -39.7% 5.0% -34.4% 1.7%
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