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European Industrial Orders Decline More Than Forecast

European Industrial Orders Decline More Than Forecast
Growth in Europe’s services and manufacturing industries weakened last month and unemployment held at the highest in almost 12 years in July. Photographer: Michele Tantussi/Bloomberg

Sept. 22 (Bloomberg) -- European industrial orders declined more than economists forecast in July, led by a drop in capital goods such as factory machinery.

Orders in the 16-nation euro area decreased 2.4 percent from June, when they rose 2.4 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast orders to drop 1.4 percent in July, the median of 17 estimates in a Bloomberg News survey showed. From a year earlier, July industrial orders jumped 11 percent after rising 23 percent in June.

European manufacturers may curb output and hiring as a cooling global economy threatens to undermine exports just as governments step up spending cuts. The European Commission on Sept. 13 forecast the region’s recovery would show a more “moderate” pace in the second half. In the U.S., the world’s largest economy, industrial output weakened in August.

“The global economic dynamic is already past its peak,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “We’ll see some cooling in the second half along with weaker output growth even if we’re still far from a double dip.”

The euro was higher against the dollar after the data, trading at $1.3310 at 10:02 a.m. in London, up 0.4 percent on the day.

Transport Equipment

Euro-area orders for capital goods dropped 5.1 percent from the previous month, today’s report showed. Orders for durable consumer goods fell 3.2 percent and those for intermediate goods slipped 0.1 percent. Orders excluding heavy transport equipment such as ships and trains declined 0.6 percent in the month.

“Consumers remain reluctant to splash out on big-ticket items,” said Howard Archer, chief European economist at IHS Global Insight in London. “While the manufacturing sector still appears to be performing pretty decently, there are mounting signs that activity peaked in the second quarter and manufacturers will see softer expansion over the coming months.”

The European economy may expand 0.5 percent in the third quarter after growing 1 percent in the previous three months, the Brussels-based commission said last week. Nobel Prize-winning economist Joseph Stiglitz said on Sept. 20 that he sees only “very limited growth” in Europe.

The euro’s 7.1 percent depreciation against the dollar this year may help shield exporters from a global slowdown by making their goods more competitive. Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, said on Sept. 9 that sales increased 13 percent in August.

Mixed Signs

So far, the economy is showing mixed signs of a slowdown. European confidence in the economic outlook improved to the highest in more than two years in August. Growth in Europe’s services and manufacturing industries weakened last month and unemployment held at the highest in almost 12 years in July.

“We have now solid ground under our feet,” but “there’s no reason to shout for victory,” EU Commissioner for Economic and Monetary Affairs Olli Rehn said on Sept. 13 in Brussels. “Instead we must stay alert and vigilant in the face of the remaining uncertainties.”

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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