Euro zone industrial orders tumble

Euro zone industrial new orders slumped in September, the EU said today, the deepest fall since December 2008 and far worse than economists had forecast, in the latest sign that Europe may be heading for a recession.

Orders in the 17 countries sharing the euro tumbled 6.4 per cent in the month compared to August, well below expectations of a 2.5 per cent fall, with Germany and France registering sharp contractions, the EU's Statistics Office Eurostat said.

"The scale of the deterioration is surprising," said Clemente de Lucia, an economist at BNP Paribas. "We are entering some kind of contraction in the last quarter of this year that will continue in the first quarter of next year," he said.

Orders of capital goods, a measure of investment in new machinery, fell the most in September compared to the previous month, sliding 6.8 per cent and suggesting factory managers and companies made a clear call to pull back expansion plans.

On an annual basis, industrial new orders in the euro zone rose 1.6 per cent in September.

As the epicentre of the sovereign debt crisis has moved to Rome from Athens, some economists are predicting a deeper and longer recession than first seen. ABN Amro recently cut its euro zone gross domestic product forecast for 2012 to a contraction of 0.8 per cent, from growth of 0.4 per cent.

Italy's bond yields have soared to levels seen as unsustainable and the euro zone may not have the means to rescue Rome if it shut out of capital markets. Worries about Italy have spread to France, which has a deficit running at nearly 6 per cent of GDP, and French yields have ballooned.

Germany witnessed one of its worst bond sales since the launch of the euro on Wednesday, adding to concerns that the debt crisis may now threaten Berlin.

"It is now very clear that this debt crisis has also affected the real economy and the real economy is now going down, for sure," said Peter Vanden Houte at ING, pointing to the 0.7-point fall in the purchasing managers' index for manufacturing in November, also released today.

Reuters