Italian Industrial Orders Slip in May

Italy's Industrial orders slipped in May after increases in back-to-back months. In May foreign orders fell hard while domestic orders slipped by just 0.2%. But the string of declines for domestic orders is longer. The consistency of the weakness in domestic orders is the real story here.

Foreign orders are rising at a 38% annual rate over three months, accelerating steadily from a 4.2% gain year-over-year. The foreign sector looks solid except for the 4.5% drop in May (but that is largely explained away by the 9.2% pop in April).

Italian domestic orders are not accelerating their decline but their trends are palpably negative at a -4.1% annual rate over three months, a -11.8% rate over six months and a -2.1% pace over 12 months.

The story is told clearly by the chart that shows export orders off their peak, but domestic orders losing momentum and starting to dip year-over-year.

Italy's story adds to the weakness in German orders already reported. Germany had showed weakness in both domestic and foreign orders. It is surprising to see Italian orders doing better than German orders in foreign markets, but then that is just for the month as German orders are doing better over 12 months.

Still, we wonder about Europe. We also wonder about the hit to growth that will be taken by the European economies, especially Germany that trades relatively more with Russia. For now European growth is still in gear. But there has been a lot of irregularity recently. With the state of affairs in Ukraine and the recent plane shoot-down at its border, it's hard to imagine relations getting better any time soon. Meantime, Europe is showing continuing sluggishness and even weakness.