CECIMO Statistical Toolbox
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EXECUTIVE SUMMARY – CECIMO STATISTICAL TOOL BOX
JULY 2010
After some signs of relief on the financial markets in May 2010 following the EU package aimed at supporting the sovereign debt of some European countries, investors seemed less confident in June. A recent Bloomberg survey of global investors has found that less than a quarter of respondents think that the region’s €750bn support package will prevent the monetary union’s break up or a member nation’s default. Yet business confidence is a key indicator in cyclical industrial sectors such as machine tools.
Production statistics for April 2010 show that industrial production continued to rise almost everywhere. With 18% over the same period last year, the Indian industrial output was even stronger than forecasted. In the Eurozone, a growing industrial production of intermediate and investment goods did, in fact, offset the decreasing production of consumer goods over the previous month.
Liquidity is scarce, and companies continue to face credit crunch. The European central bank buys some assets (such as sovereign debt) in order to give some liquidity to the market. Building up the necessary European recovery during a period of decreasing monetary mass may become a real challenge.
The dilemma of debt versus growth was key during the Toronto G20 meeting on 26th and 27th June. Although financial markets reacted positively to the Chinese sign of flexibility as regards the Yuan value, markets are still concerned by the lack of perspectives for growth in the medium term in the developed economies, which may explain the recent volatility of markets.
Volatility, lack of liquidity, easing of confidence and concerns about the sustainable recovery in Europe and in the US over the end of 2010 is also what was observed in the different indicators of the tool box in June 2010.
1.1. Machine Tool Orders
Final data confirmed the trend observed with the preliminary results last month. The upturn observed in machine tool orders in CECIMO countries in the last quarter of 2009 was confirmed in the first quarter of 2010, at least for foreign and total orders. This shows the evidence of an export-led recovery (and notably exports to the emerging economies).
2.1. GDP
The GDP grew by 1.3% in the EU 27 in the first quarter of 2010. Year on year, this is a 2.6% growth. Turnaround in GDP occurred in the second quarter of 2009. It took 3 quarters for machine tool orders to turn around following GDP (on a 12-month rolling basis).
2.2. Interest rates – EURIBOR
Even though the Euribor interbank 3-month rate increased by 3% in the second quarter of 2010 in comparison with the previous quarter, it remains at its lowest level since the beginning of the historical series in 1999, and decreased by 48% over the same period last year. The European Central Bank announced in June 2010 that interest rates are expected to remain on hold until at least 2011, as a result of uneven growth and low inflation in the Eurozone. Despite the low interest rates, the recovery is still hampered by a depressed money supply in Europe.
2.3. New Orders in Capital Goods
New orders of capital goods increased by 2% in April 2010 in comparison with March 2010. On a yearly basis, this is a 13% increase. Given the 84% correlation observed between 12-month rolling capital orders and 12-month rolling MT orders since 1998, our forecasts for MT orders are so far optimistic as regards the second quarter of 2010.
2.4. Industrial Production in Manufacturing The April 2010 data for industrial production in the Eurozone shows a 2.4% increase compared with the quarterly average of the first quarter of 2010. However, Eurostat points out that the situation differs strongly from country to country. All in all, this is a 7% increase year on year (with a 8% annual drop, the 12-month rolling basis has still not turned around). 2.5. Gross Fixed Capital Formation (GFCF) The Gross Fixed Capital Formation has not turned around yet. Although investment in capital goods has already experienced a rebound. Investments from the public sector and from households (also included in GFCF) have slowed down the recovery of the aggregated indicator. 2.7. Bank Lending Survey The net demand for company loans decreased in the second quarter of 2010 (based on the April bank lending survey) after a continuous growth since the beginning of 2009. Given the 86% correlation observed with this indicator + 6 months, this may be a warning for the trend in Machine Tool orders at the end of 2010. There may be a risk that the current depressed monetary supply and the global financial instability’s impact the recovery in the machine tool sector). 3.1. Business Confidence in Europe The OECD business confidence indicator experienced a slight decrease in May 2010 in comparison with April (from 101.1 to 100.6), possibly due to concerns following the Greece crisis and to the emergency plan decided by the EU at the beginning of May. 3.2. PMI Index Almost all countries experienced an easing in their PMI in June 2010. The "new export orders" were generally the sub-index that slowed most, yet remaining above the 50 level. Output is still growing solidly as a consequence of the rise in orders in the last months (with a peak in April 2010). The pace of recovery is therefore easing, and may be linked to the first signs of the overheating of the Chinese economy together with the social riots that took place last month. The latter may have generated some concerns on the sustainability and the pace of the Chinese growth. Whereas American and Asian PMI experienced a clear decrease in June 2010, European indexes remained flat, with the growth in output offsetting the easing in new orders. The June MT-IX saw a 16% increase over that of May, which is a 59% rise on a 12-month basis. Although this is a satisfactory result following a disappointing May index, this is also the confirmation of the current general volatility on the Stock markets, and especially for companies in cyclical sectors like the machine tool industry. The uncertainties regarding currencies and public debts have an impact on growth forecasts and business confidence, which are both strongly correlated with machine tool orders. The 12-month rolling index, which smoothes the volatility effect, shows a slow but steady upturn trend since the third quarter of 2009. 5. CECIMO External trade of machine tools in Q1 2010 After a good end of 2009 for CECIMO exports and an increase of its global market share, the first quarter of 2010 was disappointing with a 27% decrease over the same period last year. In the same period, Japan increased its exports by 6%, confirming the upturn since the third quarter of 2009. - Russia surpassed the USA as the second largest client country of CECIMO in the first quarter of 2010. - Strong rise of CECIMO exports towards the Middle East countries. - 64% of CECIMO sales outside of CECIMO countries in Q1 2010 (56% in the first quarter of 2009)
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CECIMO Statistical Toolbox - Updated: July 2010
