Eurozone industrial new orders jumped more than expected in August, pointing to continued robust manufacturing activity later this year and raising chances for more European Central Bank rate rises in 2007.
The European Union's statistics office said industrial new orders rose 3.7 percent month-on-month for a year-on-year surge of 14.3 percent, driven by demand for trains, boats and planes as well as basic metals and metal products. Economists polled by Reuters had expected orders in the 12 countries using the euro to rise 0.8 percent on the month for a 10.1 percent annual gain.
"Today's numbers ... offer further evidence that the third quarter will be another strong quarter for growth," said Ken Wattret, economist at BNP Paribas. While orders for transport equipment tend to be volatile, even without them industrial orders rose 2.7 percent month-on-month and 12.6 percent year-on-year, beating consensus expectations.
The orders, which will eventually translate into output, are likely to be seen as another sign of robust economic activity in the single currency area, where economic growth is expected almost to double this year to 2.5 percent against 2005.
"It suggests that on the production side, the eurozone economy remains on a very firm footing," said Matthew Sharratt, economist at Bank of America.
"Last week we have seen a strong rise in eurozone industrial output in August and this orders data suggests this is likely to continue in the near future," he said.
Economists expect the ECB to raise interest rates by 25 basis points to 3.5 percent in December to stem medium-term inflationary pressures as the economy and money supply grow.
Many economists believe the ECB will take a break from further rate rises after December to gauge the extent of an expected economic slowdown due to higher interest rates, tighter fiscal policy and slower global growth that will hit exports.
Sentiment indicators in the eurozone already point to a moderation of growth in the latter part of the year, economists said, but more upbeat data such as the August new orders, coupled with other indicators, could yet trigger more ECB rises. In annual terms, orders were highest for basic metals and fabricated metal products, surging 22.1 percent, followed by transport equipment orders, up 19.8 percent, and demand for machinery and equipment, up 16.1 percent. Some of the increase in order value for basic metals and metal products is likely to have come from a sharp rise in metals prices over the last year.
Base metals prices have soared since last December, led by surges of 250 percent in zinc and 77 percent in copper. Precious metals also showed strong growth, led by a 14 percent rise in the price of gold. European benchmark hot rolled coil carbon steel has risen 22 percent since the start of the year to around $480-$490 a tonne.