Analysis: EMU March New Order Growth Beats All Expectations

March: +5.2% m/m, +19.8% y/y

MNI median: +1.8% m/m
MNI range: +1.0% to +3.2% m/m

February: +1.9% m/m (revised from +1.5%)
January: -1.5% m/m (revised from -1.6%)
December: +1.3% m/m (revised from +0.6%)
November: +3.0% m/m (revised from +3.1%) October: -1.7% m/m (revised from -2.4%)
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FRANKFURT (MNI) – New industry orders in the Eurozone rose at the
fastest pace in almost three years in March, with notable gains across
the board, while four of the previous five months were revised upward,
Eurostat reported on Tuesday.

Taking into account February’s upward revision, March’s 5.2%
monthly increase gave a 19.8% rise on the year, the strongest annual
gain since May 2000. However, orders were still more than 20% below
pre-crisis levels.

Excluding the often volatile demand for heavy transport equipment
(+32.2% m/m, +39.0% y/y), new orders jumped 4.5% since February and were
20.2% higher on the year. (It should be noted that, with a weight of
only 2.9%, heavy transport equipment demand has a very limited impact on
the overall index.)

Demand for intermediate goods continued to strengthen in March
(+5.4% m/m, +31.0% y/y), signalling good news for production in the
coming months. Capital goods orders jumped 5.7% since February, more
than doubling the previous month’s rise for an annual increase of 15.6%

Non-durable consumer goods orders (+4.2% m/m, +6.5% y/y) rebounded
in March after two consecutive declines, while durable consumer goods
demand growth was steady on the month (+2.4% m/m, +11.2% y/y),
suggesting household spending may not be limited to essential items.

Firms cited in the latest purchasing managers poll (PMI) noted
ongoing growth in demand in both April and May, although gains in orders
slowed in May (56.7) from April’s 32-month high (59.5).

Producers’ assessment of order book levels improved for the 10th
straight month in April, but was still well below the long-term average,
the European Commission’s survey showed. The estimated number of months
of assured output guaranteed by orders on hand continued to rise and was
only slightly below the long-run average of 3.1 months.

Among the larger economies, France registered the most significant
monthly change in orders, which rose 6.5% since February for an annual
increase of 14.0%. National data showed a sharp spike in demand for
heavy transport equipment, as reflected in the pan-Eurozone figure, as
well as more moderate order gains in most other sectors.

Firms cited in the Bank of France’s industry survey in April
reported order books recovering, remaining “on the whole, close to
normal levels.” Insee’s poll showed a marked rise in domestic orders,
but a sharp drop in foreign demand for autos. Manufacturers polled in
the May PMI report also highlighted rising orders, with growth in new
business slowing only slightly from April’s 41-month high.

The month rise in German new orders was also impressive at 5.7%. As
a result, the annual change came to +31.0%, the strongest jump since
1991. Adjusting for the number of workdays, the 26.1% annual rise was
also a 19-year record.

Boosted by growing demand, both at home (+5.4%) and from abroad
(+4.7%), industrial orders in Germany rose much more than expected on
the month, leading the Economics Ministry to conclude that “a
continuation and firming of the recovery process is becoming apparent
for industrial production.”

In Italy, new orders growth slowed to +0.9% on the month, though
accelerated to an annual rate of +12.5%. A growing proportion of Italian
firms surveyed by the ISAE economic research institute reassessed
positively their order books in April. As a result, the sub-indicator
rose to its highest since October 2008 and helped to lift the overall
business sentiment to its best level in almost two years.

Spanish new orders increased 3.2% since February, leaving demand
18.2% higher on the year.

–Frankfurt bureau; +49 69 720 142; frankfurt@marketnews.com

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