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Economy in Brief

Belgium Leads The Way, Pauses Then Resumes Its Climb
by Robert Brusca January 25, 2010

Belgium is a small open EMU economy that tends to lead the way in the Euro-business cycle. It is headed higher once again in January. The chart above shows that the Belgium MFG index usually surges early and peaks ahead of the indices for Germany and EMU. At this point in the cycle Belgium is doing that again. After leading the parade higher, the Belgian National Bank index of MFG paused, but has resumed its move higher. That’s good news for Europe.

Belgium is a small open economy that sits at the cross roads of Euro-activity. Its index is usually the first released among the Zone members so it is a natural as a bellwether from a timing standpoint. To underscore that point the index reliably tends to lead the Europe’s cycle hence paying attention to this small country’s economic data makes considerable sense.

Just today Germany sharply revised up its orders in November that it had released on Friday, leading to upward revisions to November EMU orders as well. Now in fresh data from January, the Belgian bank index is continuing to gain momentum. The overall Belgian index has improved its reading for the 10th month in a row. Manufacturing is back to improving after a one-month misstep; MFG has improved in eight of the last ten months.

The Belgian index places MFG in the top two thirds of its range. Business services stand in the top 40% of its range. Wholesaling and retailing are near mid-range in the 47th percentile. Construction is lagging badly in Belgium standing in the eighth percentile of its range.

For MFG the orders assessment is very up beat with both domestic and foreign orders in the 60th and 70th percentiles of their respective ranges. Like Germany and EMU, Belgium shows that foreign orders are the greater source for growth. Production stands even higher in the 75th percentile of its range.

On balance the Belgian Bank index is a bit reassuring ahead of the release of the monthly German reports form Zew and the IFO as well as the EMU-wide releases from the European Commission. There has been some sputtering in European and in US data recently. Does the Belgian index point to a re-emergence of up beat reports for the month ahead? We shall soon see, but based on historic relationships, the best bet is that it does point to better euro-reports for the month ahead.

Belgium National Bank Indices
  Jan-10 Dec-09 Nov-09 3Mo Change 6MO Change 12Mo Change Percentile
Total Ind -7.0 -7.9 -8.8 7.2 15.8 20.6 60.5%
 MFG -7.2 -9.3 -8.6 8.6 14.7 21.8 67.2%
  Prod 7.0 4.0 6.0 -2.0 13.0 28.0 75.5%
  Dom Ord -4.0 -9.0 -9.0 5.0 6.0 13.0 60.8%
  FGN Ord 8.0 -3.0 -3.0 -1.0 15.0 43.0 70.3%
  Prices 3.0 -9.0 -8.0 11.0 20.0 12.0 66.7%
Current assess
 Tot Ord -34.0 -38.0 -36.0 2.0 15.0 15.0 33.3%
  Fgn Ord -34.0 -38.0 -34.0 4.0 15.0 19.0 38.0%
   Inventories -13.0 -12.0 -10.0 -8.0 -9.0 -11.0 0.0%
Wholesale& Retail -9.0 -6.3 -10.0 8.1 8.6 18.3 47.5%
Construction -15.7 -9.1 -10.0 -5.0 0.2 -0.2 8.0%
Business Services 3.1 -1.4 -7.8 13.0 38.6 37.1 59.2%
Comparisons: Changes lag one month 1-Mo Lag
EU Index: Industry #N/A -16.0 -19.0 8.0 9.0 17.0 48.9%
Gy Index:Industry #N/A -19.0 -21.0 10.0 10.0 15.0 42.3%
Compare: BNB Index --  --   -- 9.9 10.3 20.9 Since Jan-96
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