Euro Orders In The Big Three

Euro orders: no fries with that burger...New industrial orders readings from France round out the total for the big three in EMU. France has showed the most recent weakness with an orders drop of 3.4% in April. After a jackrabbit start, France's order trend has become erratic in recent months as the graphic demonstrates. But Germany and Italy continue to show strong trend growth with the German experience dominant. So orders are on the upswing but not with all the trimmings.

The upside of the downside...The data in the table (see the two columns at the far right) provide another perspective on the rebound in activity. These columns show several two-year benchmarks for each country that help to set the parameters for assessing the ongoing rebound. For example, orders in France are down the most -at -32% - from their two-year peak. German orders are down the least with a drop of -16.6%. In terms of the rebound Germany outstrips the others with a very strong 36% snap back from its low compared to a 20% gain for Italy and a much milder 8% rise for France. These statistics help you to navigate though the bumpy monthly numbers to better place each of theses nations in their own recovery process.

Much the same down-stroke for all the folk...The big three EMU economies all saw orders fall by about the same amount from peak to trough with Italy's 63.3% being the biggest drop and Germany's 61.1% being the smallest, marking a small range. But Germany is showing the greatest ability to rebound largely because of its ability to exploit rising global demand though its export prowess. France, which has tended to rely more on domestic demand, seems to be hitting a wall in terms of its recovery process while Italy is rising in the footsteps of Germany's strong gain. Despite the fact that when indebted EMU nations are discussed Italy is named right after Ireland and Spain, whatever concerns are out there about Italy they have yet to impact economic performance.

All for growth and growth for all... but not equally-- On balance the Euro expansion at the country level shows signs of strength and of continuing as Germany and Italy perform. However, there are also hints of maturity and slowing in the form of France. Clearly there is still a lot of unused capacity in the Zone so no one is hitting a real wall of any sort; orders are still well off from past peak levels in the big three as well as throughout the Zone. We can peruse these data and see why some have confidence in Europe and why others have reservations. But that sort of variation is also quite typical of economic recovery periods. It's too soon to sound alarms about euro-area growth and not the right time to get complacent about prospects.

What a country wants, what a country gets...With that as background, it is not surprising that the view of the zone is a confused one. The most indebted euro-nations are undertaking austerity measures due to market pressures or to keep from being hemmed in by them. The most fiscally responsible (Germany!) is undertaking its own belt-tightening because it has a history of discipline. But the Zone needs domestic demand and austerity works against that. Germany is pursing its own self-interest not its Zone's best interests.

The spin-doctor is in...I continue to urge euro-observers to look closely at policies and to separate them from rhetoric. It is clear that markets demand action. It is clear that 'governments' see this and have tried to be responsive. It is also clear that when steps are taken the various electorates howl in protest (except in Germany). And that should give us pause about thinking thoughts of how austere Europe will become.

Scylla and Charybdis -Europe will do something, but growth in Europe is not at risk. There simply is no taste for it. So don't look for politicians to do things that will cause them problems. Look, instead, for the rhetoric of austerity to outstrip the action of contraction as politicians try to navigate a successful course (for them) between what markets want and what their respective electorates will stand. Scylla and Charybdis live, but in a new form. It's a very Greek image for this Greek inspired drama, one that, hopefully, can keep from becoming a tragedy.

Euro-Area Industrial Orders & Sales Trends
Saar except m/m	% m/m			Apr 10	Apr 10	Apr 10	Apr 09	Qtr-2 Date	From 2Y	From 2Y
Euro-Area Detail	Apr 10	Mar 10	Feb 10	3Mo	6mo	12mo	12mo	Saar	max	Min
Germany:	3.3%	5.9%	0.5%	45.9%	40.1%	32.5%	-35.5%	53.6%	-16.6%	36.3%
France:	-3.4%	6.3%	-1.2%	6.1%	12.4%	8.4%	-31.1%	1.1%	-32.0%	8.4%
Italy	4.7%	1.1%	-0.2%	24.2%	23.6%	20.2%	-32.0%	36.7%	-23.2%	20.2%