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New data painted a downbeat picture of the eurozone economy on Thursday, with industrial demand weaker than expected and producer price pressures unrelenting, an unwelcome mix with the currency zone expected to enter recession soon.
Manufacturing orders in the 17 countries that share the euro rose 1.8 percent in October, recovering from an almost 8 percent fall in September, the European Union's statistics office Eurostat said. Producer prices rose 0.2 percent in November, more than economists were expecting.
----- New orders up by 1.8pc in October, well below expectations
While up, the orders were still substantially below what economists were expecting, and despite the volatility of the figures, the overall trend has been negative since June, when Europe's two-year run in manufacturing growth stalled. "The outlook for the industrial sector around the turn of the year isn't going to be particularly great," said Ben May, an economist at Capital Economics. "Growth in the sector is likely to slow, supporting the view that the wider economy is likely to fall back into recession," he said.
A worsening debt crisis that has spread to the heart of the eurozone and is threatening the top-notch credit rating of France, mixed with austerity drives across the eurozone, have sapped business confidence and household spending. That has cascaded down to factories producing machinery to childrens' toys. New orders in Germany, Europe's biggest economy and export powerhouse, recovered in October on a monthly basis, rising 5.5 percent after falling 4.6 percent in September. But the larger eurozone economies of Belgium, France, Italy and Spain all posted falls in October.
New orders for durable consumer goods such as televisions, furniture and cars fell 2.3 percent on a monthly basis, the biggest drop in Eurostat's index, suggesting households are cutting back spending as joblessness rises in the eurozone. European manufacturing is likely to be sickly for the remainder of 2011 and early 2012. The more forward-looking Markit Eurozone Manufacturing Purchasing Managers' Index, which measures factory activity, rose slightly in December to 46.9 from November's 28-month low of 46.4, but marked a fifth month below the 50 mark that divides growth from contraction.
Economists took some solace from prices at factory gates that signalled underlying pressures were easing, albeit slowly. Energy prices pushed up prices at factory gates in the eurozone by 0.2 percent in the month, which was higher than the 0.1 percent increase expected in a Reuters poll of economists. On an annual basis, energy was again a major factor, pushing prices up 5.3 percent year-on-year, higher than expectations of a 5.2 percent rise. But stripping out energy and construction, industrial producer prices actually fell 0.1 percent in November.

Copyright Reuters, 2012

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