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Wednesday, September 22, 2010

European Manufacturing Rebound Hits Speed Bump

WSJ details:

New industrial orders in the euro zone posted their sharpest monthly drop for 19 months in July, led by a slump in orders for capital goods, official data showed Wednesday.

Factory orders dropped 2.4% from June—the sharpest decline since December 2008—but were 11.2% higher than in July a year earlier, the European Union's Eurostat statistics agency said. June's figures were also revised down slightly to show orders rose 2.4% month-to-month and 22.7% year-to-year.

The July figures were weaker than expected. Economists had predicted orders would be 1.6% lower from the previous month and 16.3% higher than a year earlier, according to a Dow Jones Newswires survey last week.

The figures appear to support the view that the euro zone's economic recovery is likely to lose some steam in the second half of the year, in part because of government spending cuts designed to reduce the size of countries' budget deficits.
Ignore Denmark below, which had grown 23.9% in June and is volatile due to aerospace purchases.


Over the longer term, we see that although production has rebounded significantly off lows, intermediate and capital goods production is still way below previous peaks.



A slow down combined with the recent surge in the Euro that will impact export price levels means that Europe will be facing some severe headwinds in coming months.

Source: Eurostat