June preliminary: -0.7% m/m, +11.1% y/y

MNI median forecast: +0.4% m/m, +12.2% y/y
MNI survey range: -2.8% to +1.0% m/m

May: +3.6% m/m (+3.6%)
April revision: -0.3% m/m (-0.1%)
March revision: +0.6% m/m (+0.4%)
February: +1.5% m/m (+0.3%)
January revision: +0.9% m/m (+1.9%)
—

PARIS (MNI) – Eurozone industry orders surprised on the downside in
June, despite a strong boost from demand for heavy transport, Eurostat
said Wednesday.

After a robust rebound in May, the 0.7% setback in June left orders
11.1% higher on the year, but still more than 5% below pre-crisis peaks.
The 2Q gain of 2.7% was respectable but well below the 3.9% surge in 1Q.

As in the previous two months, June’s results were sweetened by
robust demand for heavy transport equipment, which tends to be very
volatile with a limited immediate impact on production. Excluding this
category, orders dropped 3.0% in June, more than retracing the rise in
May.

The pick-up in heavy transport demand helped capital goods orders
to a 4.1% monthly rise, giving a 17.1% gain on the year. But this was
outweighed by declines in other branches. Orders for intermediate goods
fell 5.3%, for a gain of 5.7% on the year. Consumer durables demand
dropped 3.2% and was 5.8% lower on the year. Non-durables orders were
down 3.2% on the month and 2.7% higher on the year.

Quarterly results excluding heavy transport reveal a more
pronounced slowdown in orders gains from 4.6% in 1Q to just 0.2% in 2Q.
While these big projects will keep factories churning in selected
sectors over time, with spinoffs for many suppliers, they probably mask
the underlying trend in demand.

Leading indicators show demand weakening further in 3Q.
Manufacturers’ assessment of order books and foreign order books eroded
markedly in July, the European Commission’s survey shows. Their
assessment of new orders was the lowest in nearly two years and they
expected exports to slack off markedly.

The August PMI polls were more dire, showing orders declining for a
third month in a row at the fastest pace in over two years (46.9). Since
the slide in foreign orders was flatter (47.4), domestic demand must
have contracted even more.

Monthly results for individual countries are more positive than the
aggregate figure would suggest.

German orders had surprised on the upside in June with 1.8% rise
that gave an 11.6% gain on the year. National data revealed that there
was a further increase in bulk orders to a near record level, which
boosted demand for investment goods by 5.0%, offsetting declines in
other branches.

The Ifo institute’s survey of German manufacturers this month
signalled a further erosion in output prospects at the six-month horizon
to the lowest level in two years. “Firms have downgraded further their
expectations for export business,” Ifo noted. The PMI poll showed new
orders contracting further (48.7) in August, but at a slower pace than
in July (47.4).

New orders in France spiked up 13.8% in June, also bolstered by
demand for heavy transport equipment. Indeed, excluding this category,
the monthly rise was only 0.6%, led by autos and high tech equipment,
national data showed.

As in Germany, leading indicators for French industry demand have
deteriorated rapidly of late. Insee’s own survey showed manufacturers’
assessment of order books slid in July to the lowest level since the
start of the year. The August factory PMI showed new orders falling at
the fastest pace in 27 months.

In Spain, orders fell back 1.5% after a 4.2% rebound in May, giving
a 2.7% gain on the year. Producers polled by the Commission in July
signaled a setback for export orders after an unsteady recovery over the
past year. Still, their assessment remained well above the long-term
average, while their view of total orders was far below, confirming that
weak domestic demand is the main problem. The PMI poll flagged another
sharp fall in new orders in July (43.4).

Data for Italy were not released by Eurostat, although they
contributed to the Eurozone average. In light of positive results for
the two larger economies, Italy probably dragged down the aggregate
figure. Manufacturers’ assessment of total and foreign demand eroded
further in July to the lowest levels in roughly a year, according to
Istat. The July PMI poll signaled another month of falling orders
(48.5).

Monthly results were quite mixed for the reporting countries. There
were gains in Ireland (+0.2%), Portugal (+0.6%) and especially Finland
(+10.2%), and setbacks in Slovenia (-1.2%), Greece (-1.4%), the
Netherlands (-2.9%), Slovakia (-3.8%) and Estonia (-9.8%).

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

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