Economy in Brief

Germany's factory orders declined for the third straight month in July. Real new orders fell 2.9% month-on-month in July, against expectations for a small increase. The drop was sharper than a 0.2% decrease in June; foreign orders declined 3.1% in July, as orders from the euro area contracted 3.8%, and orders from outside the euro area fell by 2.8%. These metrics suggest that demand both inside and outside the euro area remains weak. Domestic orders dropped 2.5% in July, an exact offset to their gain in June. When ranked on growth rates over the last 30 years, all three sector growth rates are below their medians (below a ranking of 50%). However, when ranked on the real index number level, total orders rank at their 55.6 percentile, foreign orders rank at their 79.5 percentile and domestic orders rank at their 15.2 percentile. All-in-all it’s an unimpressive report.

Orders sequentially and QTD: Sequential trends are ambivalent but still clearly weak. Sequential growth rates do not show a clear acceleration/deceleration pattern. But for total, foreign and domestic real orders, both 3-month and 12-month growth rates are negative (one exception: foreign orders over 12 months). Domestic orders show negative growth over 6 months as well. Quarter-to-date growth rates are negative for all sectors.

Sales trends: Real sales are mixed in July, rising 0.9% overall on declines in two sectors: consumer durables and intermediate goods. Sector sales mostly maintain growth as manufacturing sales are positive based on growth rates over 12 months, 6 months, and 3 months. Consumer goods and intermediate goods sales show deceleration and ongoing contraction. Consumer durable goods and intermediate goods show QTD declines. On the manufacturing & mining to total, manufacturing and capital goods show index standings above their respective 50% on 30 years of data. That also shows above-median growth rates on annual data along with consumer goods and consumer nondurable goods.

Industrial confidence: Industrial confidence measures for Germany, France, Italy, and Spain, the four largest EMU members, show improved (but still net negative readings) in July compared to June. Over three months and six months, Germany and Italy show some improvement; France still shows steady deterioration. Spain shows improvement over 3 months and it is only slight improvement. The queue standings for the industrial reading over 30 years of data show Spain with an above-median reading in July. Germany and France are exceptionally weak and Italy has been weaker only 26% of the time based on the queue standing measure. Not only are German orders and demand weak and faltering but the broad EU Commission measures of industrial confidence show broadly weak readings for the largest economies in the EMU.

Retail sales volume in the euro area fell by 0.5% in July after rising by 0.6% in June. The three-month percent change is -0.8% at an annual rate; over six months real retail sales volumes are rising at a 1.6% annual rate and over 12 months they're rising at a 2.2% annual rate. The slowdown in retail sales volume growth has been steady from 12-months to 6-months to 3-months.

For motor vehicle registrations, the patterns are much choppier with an 11.5% increase in registrations in the EU in July after a drop of 4.6% in June, and a larger drop in May. Over 3 months monetary union motor vehicle registrations are falling at a 3.4% annual rate, after rising at an 8.7% annual rate over 6 months; over 12 months that gain is cut to a 5.9% annual rate. There's no clear trend here for motor vehicle registrations, except to note that over 3 months conditions are much weaker and that is mostly driven by June and May because July was quite strong. In the big picture, vehicle sales have been flat and moving sideways for quite some time in the monetary union- since COVID registrations are lower on balance by 10.5% even with the spike in sales in July.

Individual countries show quite different results. Germany is showing persistent deceleration in retail sales volume growth from 12-months to 6-months to 3-months, culminating in negative numbers for growth over 3 months and 6 months. For Denmark, a country that's not part of the single currency union, there's a hint of a slowdown with growth rates of 3.4% over 12 months and 3.6% over 6 months to give way to a 1.2% rate of increase annualized over 3 months. Both Sweden and Norway show real retail sales volumes in a slippage mode as growth rates ease over 6 months compared to 12 months and then ease again over 3 months compared to 6 months. For Sweden, the 3-month growth rate is a negative result at -5.7% at an annual rate.

In the quarter to date - and this is an early calculation since it's July - the monetary union is starting off with a negative growth rate of -1.2% at an annual rate for total retail sales volumes; this is affected strongly by a -6.5% annual rate reported by Germany, the largest economy and the euro area. There are positive growth rates on a quarter-to-date basis for the rest of the reporters in the table. The Netherlands logs a 21.9% annual rate increase; that strength has at least as much to do with the weak second quarter base as with surging sales in July.

Checking on the performance of sales back to January 2020 when COVID first appeared, total sales volume in the euro area are up 5.1% over that five-year span. Sweden logs no increase, Germany logs an increase of 2.1%, Norway logs an increase of 4.6%, with Denmark up by 4%. The strongest increases on this broad basis come from Spain with an 8.1% increase and the Netherlands with a 7.2% overall increase. Even so, for a five-year period, none of these growth rates are impressive. Clearly the European Monetary Union has been in a dead spot having a difficult time recovering from COVID, dealing with the war, and all of its displacement involving Russia and Ukraine, as well as the aftermath of the inflation from COVID, and what has been an ongoing restrictive monetary policy from the European Central Bank.