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Economy in Brief

Euro-Area IP Advanced More Strongly in Feb
by Robert Brusca  April 13, 2011

Europe's consumer sector is losing momentum as capital goods are gaining speed. Meanwhile intermediate goods seem to catching on and accelerating after a brief lull in momentum.

Consumer goods sequential growth rates have pitched a low profile over 3-mo 6-mo and 12-mo. For intermediate goods growth rates have been largely preserved at a strong pace in the 7%-10% range. While Yr/Yr capital goods trends are accelerated, sequential growth rates show a slight but steady erosion in the rate of capital goods output from 14% over 12-months to an annual rate of 7.6% over three months.

Output trends across the Zone's largest economies still look relatively solid except in Italy. While Italy's three-month growth rate is positive (barely) its six month rate is negative. Spain has a one-month negative growth rate for industrial output but is still posting a rate of nearly 6% over three months. The UK, not an EMU member, has and IP growth rate that went flat in February and has decelerated from a 5% pace over 12-months to a 3.1% annual rate over three months. Other UK measures like retail sales are turning soft.

Growth in France and in Spain is steady or accelerating. Moreover, the ECB has already started to hike rates even with uneven economic conditions in place. Today France posted a CPI with the headline up by 2.2%. But excluding energy French prices are up less than 1% Yr/Yr. The ECB can hardly be said to be justified in its tightening by this French report. Instead, it is being dogmatic and is being swayed by economic conditions in Germany where the economy has been hotter. When energy prices rise no central bank can keep that from hitting headline inflation. It can help to prevent that rise from being passed into the core by a variety of measures that do not require hiking rates immediately.

The ECB is engaged in a policy of overkill even as it presides over a weakening Zone-wide economy. The industrial sector represented in today's reports by Industrial production is the strongest sector in the community and it is already showing unevenness. German growth leads the zone and Germany has the most inflation pressure. But the Zone itself does not share so many of Germany's problems that Zone-wide monetary policy should be sent to attack them. Moreover, the recent Zew survey suggests Germany itself may have an economy whose ongoing strength and momentum may have been overrated.

Euro-Area MFG IP
SAAR Except M/M Mo/Mo Feb
11
Jan
11
Feb
11
Jan
11
Feb
11
Jan
11
 
Euro-Area Detail Feb
11
Jan
11
Dec
10
3Mo 3Mo 6Mo 6Mo 12Mo 12Mo Q:2
Date
MFG 1.1% 0.7% 1.0% 11.7% 13.4% 9.0% 9.8% 9.0% 8.2% 12.1%
Consumer 1.0% -0.3% -0.2% 1.9% 0.8% 1.7% -0.2% 2.7% 1.0% 1.4%
C-Durables 0.4% 1.8% -0.7% 6.1% 8.2% 0.3% 2.7% 4.3% 2.5%  --
C-Non-durables 0.9% -0.4% -0.3% 0.8% -0.2% 1.6% -0.6% 2.3% 0.9%  --
Intermediate 0.5% 2.7% -1.0% 8.7% 15.4% 6.8% 10.0% 10.2% 10.2% 14.7%
Capital 0.6% -0.2% 1.4% 7.6% 11.8% 8.9% 14.5% 14.0% 12.8% 7.8%
Main Euro-Area Countries and UK IP in MFG
  Mo/Mo Feb
11
Jan
11
Feb
11
Jan
11
Feb
11
Jan
11
 
MFG Only Feb
11
Jan
11
Dec
10
3Mo 3Mo 6Mo 6Mo 12Mo 12Mo Q:2
Date
Germany: 1.4% 0.3% 1.1% 11.5% 3.3% 9.0% 9.7% 15.3% 13.5% 7.5%
France:
IPxConstruct'n
0.4% 0.7% 0.3% 6.1% 14.7% 6.6% 5.7% 5.6% 5.4% 9.8%
Italy 1.2% -1.3% 0.2% 0.4% -0.5% -3.1% -1.6% 3.1% 1.4% -1.2%
Spain -1.3% 3.7% -1.0% 5.9% 16.4% -1.2% 8.1% 3.7% 6.0% 14.1%
UK:EU member 0.0% 0.9% -0.1% 3.1% 5.8% 4.2% 5.2% 5.0% 6.6% 5.0%
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