August 24, 2010 / 10:03 AM / 7 years ago

UPDATE 1-Euro zone industrial orders surge in June

* Euro zone June orders up 2.5 pct m/m, 22.6 pct y/y

* Figures augur well for Q3 growth (Updates with analyst’s comment)

By Marcin Grajewski

BRUSSELS, Aug 24 (Reuters) - Euro zone industrial new orders rose more than expected during the month of June, data showed on Monday, boding well for economic growth in the third quarter of 2010.

Industrial orders in the 16-nation currency zone increased 2.5 percent month-on-month for a 22.6 percent annual gain, European Union statistics office Eurostat said.

Economists polled by Reuters had expected figures of 1.5 percent and 22.9 percent respectively. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

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“That’s good. Shows we can take a lot of the second-quarter momentum into the second half,” said Carsten Brzeski, economist at ING.

The data could point to another quarter of economic expansion as the euro zone recovers from its sovereign debt problems and the worst economic crisis in decades. Orders point to trends in activity as they translate into future production.

Gross domestic product expanded by 1.0 percent in the second quarter from the previous one, the fastest pace in four years.

But some economists say growth could falter in the coming months, partly due to austerity measures ordered by EU many governments to ward off sovereign debt crisis. Slowing growth in the United States and China could also curtail EU exports.

“Yes, we will see a weakening of growth coming from very strong second quarter but we will see decent growth rates driven by industrial production recovery,” said Brzeski.

Eurostat revised May industrial orders upwards to 4.1 percent month-on-month and 23.0 percent annually, from previous readings of 3.8 percent and 22.7 percent. The annual gain in May was the biggest in 10 years.

Eurostat said that without volatile orders for ships, planes and trains, the monthly increase in June was 1.6 percent and the year-on-year jump 22.5 percent.

The monthly growth in orders was driven almost exclusively by a surge in demand for capital goods, which include machinery, tools and equipment -- pointing to corporate sector investment. The figure rose 5.3 percent month-on-month and 22.7 percent annually.

But orders for durable consumer goods and non-durable consumer goods fell 1.1 percent and 1.8 percent respectively, highlighting weak consumer demand.

Analysts say growth will become self-sustaining only if consumers begins to spend more, a distant prospect considering that the unemployment rate near a 12-year high of 10 percent.

Eurostat said that orders in the euro zone’s biggest economy, Germany, increased 3.9 percent on the month and surged 32.8 percent year-on-year.

In the wider 27-nation European Union, industrial new orders grew 2.4 percent in June and rose 22.5 percent annually.

Editing by Luke Baker

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