Euro-Area Orders Take Separate Paths

EMU orders surged by 3.6% in May after dropping by 0.1% in April, rising 0.4% in March, and rising 0.3% in February. After a period of some lethargy orders are back on track. Or are they? The 12-Mo, to 6-Mo to 3-Mo growth rates are configured in a slightly accelerating pattern. That is good news as the 12-mo and-in trend is rising. But the 12-Mo pattern itself (not pictured) has merely stopped falling in May as the 12-mo rate of growth is back above the 12-Mo pace as of April but is well below the 12-mo pace of Mar 2010 – Feb 2011 when growth rates average 19.1% and each month's Yr/Yr pace exceeded 13.1%.

Order patterns across the large countries do not echo the stability of the growth rate in overall EMU orders. German, French, and Spanish order patterns show clear deterioration in their respective trends. Only Italy shows order growth rates that are more or less holding up.

For the Zone as a whole, foreign order growth is slowing. But domestic order growth has picked up sharply. In May domestic orders in the Zone rose by 7.7% as foreign orders rose by just 1.4%. Over three-months foreign orders are growing at a 2.7% annual rate compared to domestic orders at 28.0%; from 12-Mo to 6-Mo to 3-Mo domestic orders are gathering pace while foreign orders are slowing in EMU.

But the more recent EMU MFG and Services PMIs show a sharp slowing in activity of all sorts of EMU activity, not just MFG. The new German IFO survey (refreshed just today) is an example of that. The July readings from the German IFO show a slowing in activity in MFG, Construction, Wholesaling, Retailing and in Services. So despite the increasing reliance in the Euro-Area on domestic growth, the leading economy in the Zone, Germany, is seeing steadily waning domestic sourced growth.