Industrial orders in the euro area declined 34.5 percent from the year-earlier month, after a revised 34.3 percent drop in January, the European Union’s statistics office in Luxembourg said yesterday. The February drop is the seventh straight decline and the largest since the data series began in 1996. From the prior month, February orders fell 0.6 percent.
The International Monetary Fund on Wednesday forecast the eurozone economy will contract 4.2 percent this year as the global recession will be deeper and the recovery slower than previously thought. As financial markets take longer to stabilize, that is increasing pressure on the European Central Bank to outline more unconventional tools to revive economic growth.
"Europe is basically waiting for the global economy" to pick up, said Nick Kounis, chief European economist at Fortis Bank Nederland in Amsterdam. "We’ll still see negative numbers for industrial orders in the coming months but increasingly less negative."
The ECB has "room to further cut the main refinancing rate," the IMF said. The Frankfurt-based central bank this month lowered its benchmark interest rate by a quarter point to a record low of 1.25 percent to spur lending and stimulate the economy. The bank will present "new non-standard measures" on
May 7, according to ECB President Jean-Claude Trichet.
Meanwhile, Europe’s manufacturing and service industries contracted at the slowest pace in six months in April, signaling the worst of the recession may be over. A composite index of activity in both industries posted its biggest gain on record, rising to 40.5 from 38.3 in March. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates contraction. Economists forecast an increase to 38.9, according to the median of nine estimates in a Bloomberg News survey.
"The economic slump is only slowing down a little bit and growth won’t resume before the fourth quarter," said Ralph Solveen, head of economic research at Commerzbank in Frankfurt. "However, leading indicators may bottom out now."
The manufacturing index rose to 36.7 from 33.9 in March, while the services index increased to 43.1 from 40.9, Markit said.
"This represents an encouraging start to the second quarter and suggests a return to stability in the euro area by the end of the year is possible," said Chris Williamson, Chief Economist at Markit. "However, the ongoing severity of the situation should not be underestimated: the latest numbers are still consistent with a double-digit annual rate of decline of manufacturing output."