July: -2.4% m/m, +11.2% y/y

MNI median: -1.5% m/m, +15.4% y/y
MNI range: -2.0% to +0.5% m/m

June: +2.4% m/m (revised from +2.5%)
May: +4.2% m/m (revised from +4.1%)
April: -0.2% m/m (unrevised)
March: +5.8% m/m (unrevised)
February: +1.9% m/m (unrevised)
—

PARIS (MNI) – Eurozone industry orders fell more than expected in
July, accentuated by a steep drop in demand for heavy transport
equipment, Eurostat said Wednesday.

The 2.4% monthly downturn completely erased the gain in June,
leaving others 11.2% higher on the year and 0.5% above the 2Q average,
but still more than 15% below pre-crisis peaks.

After strong gains in May and June, orders for heavy transport
equipment, which are often quite volatile with little immediate impact
on output, fell back sharply in July. Excluding this category, industry
orders slipped only 0.6% on the month and were 13.6% higher on the year.

Total capital goods orders dropped 5.1% in July, but strong gains
in most of the previous months still assured an 8.3% rise on the year.
Demand for intermediate goods, which had spearheaded the industry
recovery, dipped 0.1%, retracing June’s rise for an 18.2% gain on the
year.

Orders for consumer durables dropped 3.2% on the month for a 1.0%
decline on the year. Demand for non-durables recovered 0.5%, giving an
annual gain of 1.9%.

While leading indicators have signaled a slowdown in demand growth
widely anticipated as the Chinese and US economies cool, they suggest
that the downturn in July was more a result of monthly volatility than a
trend shift for the worst.

The August factory PMI showed new orders increasing at the slowest
pace since the start of the year (55.3) — well off the peak in April
(59.5) — but still rising, nonetheless.

Indeed, manufacturers’ assessment of order book levels has steadily
recovered from the record low in mid-2009 to reach the long-term average
in August, the European Commission’s surveys show. However, near-term
output expectations eroded further last month, while remaining somewhat
above average.

Last week the Commission forecast a slowdown in overall Eurozone
growth in the months ahead due to “the expected softening in the global
economy, along with the fading of the temporary factors that
kick-started the recovery.”

Still, it noted that “the spillover from the export-led industrial
rebound to the rest of the economy is gradually materializing” and
suggested in light of recent sentiment indicators that the impetus from
the industry upswing to private consumption “could prove stronger than
assumed in the baseline, as was the case in the first half of the year.”

In Germany, orders dropped 2.6% on the month but were still 18.1%
higher on the year. National data showed that the previous boost from
bulk orders swung to a big drag in July, with total investment goods
orders falling 5.5% amid a 6.1% drop in demand from other Eurozone
countries.

Even if the Bundesbank foresees a return to more normal domestic
growth rates in the months ahead, it expects the momentum in demand for
industry goods to sustain strong growth in 3Q. Manufacturers’ assessment
of current activity rose to a two-year high in August and expectations
at the six-month horizon remained “very confident” despite some slippage
linked to softer export demand, the Ifo institute said.

In France, orders rose 0.9% in July, giving a 9.4% gain on the
year. National data showed a drop in demand for heavy transport
equipment here as well. Other orders jumped 1.7% on the month, with a
6.1% leap in export orders, notably for IT products, machine tools,
autos and metallurgical goods.

French industry orders “picked up slightly” in August, the Bank of
France said on basis of its monthly business survey, predicting a
“rebound in production in the months ahead.” The August PMI poll
signaled marked acceleration in order gains (58.0 after 54.5 in July).
Most analysts expect little change in Insee’s latest barometer of
industry sentiment to be released Thursday.

After promising gains in April and May, Italy’s orders fell 5.6% in
June and another 3.2% in July to return to level one year ago. Isae’s
sector survey showed an improvement in manufacturers’ assessment of
orders in August, particularly for export orders. However, demand
expectations for the near term eroded markedly, despite improving
prospects for the economy as a whole.

In Spain, orders fell another 2.0% on the month after a 0.4%
downturn in June, giving a mere 3.4% increase on the year. Firms’
assessment of order books improved somewhat in August, bolstered by a
sharp rise in foreign demand, the Commission’s survey showed. But
near-term production expectations eroded slightly for the second month
in a row. The August factory PMI signaled a slowdown in overall order
growth (51.5 after 52.6), despite a strong pick-up in export orders
(54.2 after 51.8).

Only two reporting Eurozone countries registered order gains in
July: the Netherlands (+0.6%) and Ireland (+7.4%). One the sharpest
monthly declines was sustained by Greece (-5.4%), which left orders well
below the previous-year level (-4.1%). Elsewhere, monthly declines were
also quite steep, led by Slovenia (-5.8%), Finland (-3.2%), Portugal
(-2.6%) and Slovakia (-2.5%).

–Paris newsroom +331 4271 5540; e-mail: paris@marketnews.com

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