Eurozone Industrial Orders Surge

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Industrial orders in the eurozone rose sharply in March, official figures have shown, suggesting the manufacturing sector is likely to contribute strongly to economic growth in the June quarter. The strong order growth is a harbinger of better times ahead for manufacturing output, which has been leading the economic recovery in the euro zone region.

New orders rose by 5.2% compared with the previous month. The order growth was much faster than the 2.5% increase forecast by analysts and comes after a 1.9% rise in February. New orders across the European Union were up 5.9%.

Excluding ships, railway & aerospace equipment, for which changes tend to be more volatile, industrial new orders grew by 4.5% in the 16-nation euro area and 5% in the European Union.

Orders in Germany jumped 5.7% compared to the previous month in March, following a meek 0.5% expansion in the prior month. New orders in France also rebounded to grow 6.5%.

Orders in the 16 nations that use the euro rose by 19.8% compared with March 2009 - again exceeding expectations for 15% growth. New orders had increased 12.5% in February.

Denmark recorded the largest increase compared with the previous month, with orders rising 20.6%. Portugal saw the biggest fall, with orders plunging 9.9%. Orders in the U.K. climbed 5.5%.

Earlier this month, official figures showed industrial output grew more than expected in March, and the fact that orders during the month increased suggests that output could rise even more briskly.

"The manufacturing sector has been the leading light of the eurozone economy in the early months of 2010, benefitting from improved domestic and, especially, export demand as well as inventory rebuilding," said Howard Archer, chief European economist at IHS Global Insight. "In addition, the marked retreat in the euro is not only helping exporters but is also making eurozone manufacturers more competitive in domestic markets."

May's private sector purchasing managers' survey showed slower expansion in output and new orders, suggesting that Europe's industrial recovery might be faltering. "This may be partly due to inventory corrections drawing to a close in some countries, but it could also be a sign that the eurozone debt crisis is starting to have some dampening impact on economic activity," Archer said.

The continued weakness of the euro has increased pessimism among investors, with the currency continuing to get dumped on fears that some euro area countries may end up defaulting on their debts.

The euro showed little reaction against other major currencies following the release of the industrial new orders report. The euro traded at 0.8552 against the British pound, 1.2197 against the U.S. dollar, 1.4220 against the Swiss franc, and 109.49 against the yen.

Global stock markets fell heavily on Tuesday over continued fears about the debt crisis in the eurozone, while tensions between North and South Korea drove shares lower in Asia.

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