Eurozone industrial demand continues to rise

Eurozone industrial new orders rose in December, confirming a strong economic recovery going into 2011, but pointing to weaknesses in consumer demand.

The European Union's statistics office, Eurostat, has said industrial new orders in the 16 countries using the euro in December increased 2.1 per cent month-on-month from November, for an 18.5 per cent year-on-year gain.

Economists polled by Reuters had expected a 0.8 per cent monthly decrease and a 16.2 per cent annual rise.

December’s rise follows a similar 2.1 per cent rise in November, Howard Archer, chief economist at IHS Global Insight, said.

“The strength of industrial orders at at the end of 2010 bodes well for Eurozone industrial production in the early months of 2011 at least,” he said.

“Furthermore, latest survey news on the sector is very encouraging with the February manufacturing purchasing managers' survey for the Eurozone showing activity at a ten-year high with output, new orders, export orders, backlogs of work and employment all very healthy.”

Debt-heavy peripheral nations suffered most, with new orders down most sharply in Ireland, and a decline for a second straight month in fellow financial bailout recipient Greece.

Orders also dropped in Portugal and Spain – the countries financial markets believe could be next in line for a rescue.

Except for Germany, which suffered declining industry demand for big-ticket items, new orders were up in every other eurozone country.

Without the volatile orders for ships, planes and trains, industrial orders rose 1.3 per cent on the month and were 18.9 per cent higher than a year earlier.

Martin van Vliet, euro zone economist at ING, said the growth figures were impressive, but it was important to remember they represented a recovery from a virtual freefall in 2009.

While demand for capital and intermediate goods was strong, orders for durable consumer goods fell 2.3 percent from November – the second consecutive monthly decline – pointing to some weakness in household demand.

“This fuels the view that Eurozone consumers remain reluctant to spend on big-ticket items and are a weak link in economic activity,” said Archer.