Industrial orders improve in eurozone

New industrial orders rose for a second month in July, with data improving in most sectors and countries.

Eurostat, the Statistical Office of the European Communities, estimates that new orders were up by 2.6% in the eurozone. Within the EU27 countries, including all countries of the European Union, the number rose by 1.6% compared with the previous month.

“This reinforces hopes and expectations that the eurozone will return to growth in the third quarter,” says Howard Archer, the chief European and UK economist at IHS Global Insight.

In his daily IHS Global Insight View, he writes that the latest survey evidence offers further grounds for relative optimism. The eurozone manufacturing sector’s purchasing managers’ survey, for example, indicates that overall activity is verging on stabilising this month. Output and new orders expanded for the second month in a row, Archer says.

In June, industrial orders increased by 4% in the eurozone whereas they fell by 0.6% in the EU27. Yet when collated with last year’s data, the magnitude of the crisis becomes apparent. Compared with July 2008, the index decreased by 24.3% and 24.9% respectively.

Archer says the eurozone manufacturing sector should benefit from the major de-stocking that has occurred while demand is picking up. “Nevertheless, for sustained, significant manufacturing growth to occur, there needs to be extended growth in orders from both domestic and foreign markets, and this currently remains far from certain,” he adds.

Eurozone manufacturers will also feel the effects of the euro currently trading at the highest level in a year, at around $1.48. This will be particularly difficult for manufacturers as competition is becoming increasingly intense.

Archer says there remains a “compelling case” for the European Central Bank to maintain its accommodative attitude rather than tightening its monetary policy.

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