(Adds euro trading in fifth paragraph. For more on Europe’s sovereign-debt crisis, see EXT4.)
Nov. 23 (Bloomberg) -- European industrial orders declined the most in almost three years in September, led by Germany and France, suggesting the sovereign-debt crisis is starting to affect economic growth in the region’s core nations.
Orders in the 17-nation euro region fell 6.4 percent from August, when they rose 1.4 percent, the European Union’s statistics office in Luxembourg said today. That’s the biggest decline since December 2008. Economists had forecast orders to drop 2.7 percent, the median of 17 estimates in a Bloomberg News survey showed. Orders rose 1.6 percent from a year earlier after increasing 5.9 percent in August.
Companies may see waning orders as governments across the region toughen austerity measures, hurting domestic spending, just as exports falter. The European Central Bank on Nov. 3 unexpectedly cut interest rates, with ECB President Mario Draghi forecasting a “mild recession.” Euro-region manufacturing output contracted in November.
“The euro area has already entered recession this quarter,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “As a result, the ECB is likely to cut rates further in December.”
The euro was lower against the dollar after the data, trading at $1.3455 at 11:04 a.m. in Brussels, down 0.4 percent.
Euro-area orders for capital goods slumped 6.8 percent from August, when they rose 2.7 percent, today’s report showed. Orders for durable consumer goods dropped 0.6 percent, while those for intermediate goods slipped 3.2 percent, the statistics office said. Total orders excluding heavy transport equipment such as ships and trains fell 4.3 percent from the previous month, when they rose 0.3 percent.
Europe’s economy is edging toward a recession as tougher budget cuts prompt consumers to lower spending while faltering global export demand erodes earnings. Aixtron SE, a German maker of equipment for the semiconductor industry, doesn’t see “any substantial recovery this quarter,” Chief Executive Officer Paul Hyland said on Nov. 16.
“We’re awaiting 2012 with caution as we’re not expecting a significant pickup” in demand in developed economies, Bruno Lafont, CEO of Paris-based Lafarge SA, the world’s largest cement maker, said on Nov. 4 when announcing cost cuts. “We’re still expecting growth in emerging markets.”
The European Commission based in Brussels said on Nov. 10 that the euro-region economy may expand just 0.5 percent in 2012 after growing 1.5 percent in 2011. It had previously projected growth of 1.8 percent next year. In the U.S. and Japan, the economies may grow 1.5 percent and 1.8 percent next year, respectively, it forecast.
With governments struggling to restore investor confidence as the turmoil spreads from Greece to larger euro nations, companies are starting to cut costs to protect earnings. Euro- region unemployment unexpectedly increased in September.
“The longer this uncertain situation persists, the larger the worries that the debt crisis will spread to the real economy,” Norbert Steiner, CEO of K+S AG, Europe’s largest maker of potash, wrote in a magazine published earlier this month. “Psychology plays an important role.”
In Germany, Europe’s largest economy, industrial orders fell 4.4 percent in September from the previous month, when they slipped 1.2 percent. French orders declined 6.2 percent, while Italy reported a drop of 9.2 percent in that period. In Greece and Portugal, orders also declined in the month.
The ECB will hold its next monetary assessment on Dec. 8. The Frankfurt-based central bank will also release its latest economic projections on that day.
--With assistance from Richard Weiss in Frankfurt and Francois de Beaupuy in Paris. Editors: Jones Hayden, Andrew Clapham
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