G-7 Industrial Orders Bad All Over

February 24, 2009

In today’s overnight summary of economic news and market developments, I editorialized that the steep drop in Euroland industrial orders last quarter was as close as one generally gets to a free-falling trend.  The intent of this post is not to rescind that comment but to extend it to the rest of the Group of Seven.  Crunching out the fourth quarter-over-third quarter period average declines for industrial orders produces the following dismal annualized results.

In Euroland, total orders dropped 43.3%.  A breakout of the four largest members of the common currency group shows declines of 55.0% in Germany, 53.3% in France, 46.6% in Italy, and 42.6% in Spain.

Japanese machinery orders fell 62.4% at an annualized rate in 4Q, with drops of 51.8% in core domestic orders and 81.3% in export orders.

U.S. factory orders slumped by 46.4% last quarter, although non-defense orders excluding aircraft declined by a lesser but still big 34.1%.

British industrial orders fell by 45.3% at an annualized rate, that is if the fourth-quarter pace were sustained for an entire year, according to the Eurostat release.

Canadian manufacturing orders fell 29.6% in 4Q, a slower decline than in its G-7 partners.  However, Canada’s decline in the final two months of 2008, that is between October and December, accelerated to 80.6% at an annualized rate.

Industrial orders are placed before businesses spend money.  Orders are thus a leading economic indicator of forces that will exert force on future GDP and the business investment component of GDP more specifically.  Orders are swooning because the availability of corporate finance has dried up and in light of slumping export and consumer demand for the products that businesses produce.  Last quarter’s plunge in industrial orders points to economic growth in the present quarter that is likely to be as negative, if not more so, as growth was last autumn.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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