Both Italy and France show that broad IP trends are improving based on year-over-year growth rates, as the chart clearly demonstrates. But their short-term trends show very different dynamics.

Even the year-over-year trends show very different forces at work in the French and Italian economies. Both show IP up in the neighborhood of 3% over 12 months. But French IP is boosted by the output of consumer nondurable goods followed by intermediate goods and capital goods. Italy's output is led heavily by capital goods followed by consumer goods with intermediate goods output barely higher year-over-year.

Over the shorter sequential periods, Italy is driven still by capital goods but with intermediate goods output picking up and consumer goods output listless. In France, the strength switches in more recent periods to durable consumer goods with capital goods and consumer nondurables weakening and with intermediate goods output saying firm. French auto output and domestic spending on autos have weakened. For Italy, auto output has been firm to strong.

While both Italy and France show different areas of strength, each economy is showing continuing strength in output. Italy's strength remains centered in capital goods with intermediate goods catching on. In France, consumer goods and intermediate goods are more consistently strong. The quarter-to-date shows that these trends remain in force.

Perhaps the best news for France and Italy is that Greece appears to be making a deal with the EU. If this progresses, it will likely means that speculative pressures will not develop on other economies in the euro area that have been struggling with austerity to some degree. But it also underlines the principle that the EU expects compliance with austerity goals as Greece appears to be giving in to many of the EU demands (capitulation). In the end, the message from the EU is this: my way or the highway. We will first of all see if this Greek deal does go through as it must be struck then approved by member parliaments. Next we will see what impact this set of negotiations will have on anti-austerity parties in other EMU nations as they were at first emboldened by Greece's actions but must now be cowered by its capitulation. What a difference a week makes!