Euro-Area IP On An Upswing, Except For Consumer Goods

Industrial output in the euro-area is still putting out some good gains. This is despite the fact that the consumer goods sector continues to lag and to decline. Overall EMU output rose by 0.6% m/m in April after a gain of 1.8% in March and of 0.8% in February. The strength is real. In April consumer goods output fell by 0.9% over three-months, however, consumer goods output is up at just a 1% annualized rate compared to a 13.5% pace for all of output.

Capital goods output is growing at a accelerating pace from 12-months to six months to three months. Intermediate goods are not quite on such a clear acceleration but growth rates have been high and steady with strong growth over three-months. Consumer goods output has accelerated from 12-months to six months and has since been subdued.

In the quarter to date -just one month into the new quarter- output is growth sharply over the Q1 base. Output is up at a 13% pace in Q2 lead by a rise at a 22% pace by intermediate goods and a 15% pace by capital goods. The quarterly growth rate is held back by consumer goods where output is shrinking at nearly a 1% annual rate.

This is a familiar set of facts. We have been talking about these trends in Europe for some time. The expansion seems solid enough despite all the concerns. Mount enough concerns and they can sink the healthiest of economies. But Europe is not there yet. It still seems to be doing fine. The capital goods and intermediate goods sectors are driving output ahead, but the lagging consumer goods sector remains an impediment to getting into that next gear.

Europe needs to more home grown demand. Europe needs to get its consumer in gear. But growth is still quite solid and is not showing any sign of decelerating and certainly none of declining. With such a sharp drop in the euro in the background I think investor worries about Europe are entirely in the wrong direction.

Euro-Area MFG IP
Saar except m/m	Mo/Mo			Apr 10	Mar 10	Apr 10	Mar 10	Apr 10	Mar 10
Euro-Area Detail	Apr 10	Mar 10	Feb 10	3Mo	3Mo	6mo	6mo	12mo	12mo	Q1
MFG	0.6%	1.8%	0.8%	13.5%	19.6%	15.0%	13.8%	9.1%	7.9%	13.1%
Consumer	-0.9%	1.2%	0.0%	1.0%	9.0%	6.4%	6.1%	2.9%	4.8%	-0.9%
C-Durables	-0.1%	0.1%	0.4%	1.9%	11.4%	6.5%	7.0%	1.2%	1.3%
C-Non-durables	-1.2%	1.6%	0.1%	1.9%	10.9%	6.3%	6.1%	3.0%	5.5%
Intermediate	2.2%	1.1%	1.2%	19.7%	12.2%	11.9%	9.1%	15.1%	14.3%	22.1%
Capital	1.0%	1.7%	0.7%	14.7%	6.8%	9.3%	5.9%	8.1%	5.2%	15.5%
Main Euro-Area Countries and UK IP in MFG
	Mo/Mo			Apr 10	Mar 10	Apr 10	Mar 10	Apr 10	Mar 10
MFG Only	Apr 10	Mar 10	Feb 10	3Mo	3Mo	6mo	6mo	12mo	12mo	Q:4 Date
Germany:	0.6%	3.9%	0.0%	19.2%	19.3%	9.9%	4.6%	14.1%	10.2%	20.5%
France: IPxConstruct'n	-0.3%	1.3%	0.1%	4.5%	10.7%	6.4%	6.9%	7.9%	7.1%	3.6%
Italy	1.2%	0.1%	0.5%	7.2%	9.3%	7.0%	6.3%	8.1%	7.4%	8.7%
Spain	-1.5%	5.4%	1.6%	24.0%	14.8%	2.4%	4.6%	2.8%	5.0%	16.1%
UK: EU member	-0.3%	2.2%	1.6%	14.7%	10.2%	7.4%	8.1%	3.5%	3.7%	10.4%