Euro Zone production rose in December at the fastest pace in 10 months(see article), and Chambers will try to explain that Europe is/will be slow and for this reason CSCO revenue in Europe will drop. The real reason is lost shares to Europan competitors.
Europe buys only 13% of goods from US, % rate are has been well below US for long time and major economies are cutting taxes effective January 2001.
Brussels, Feb. 20 (Bloomberg) -- Industrial production
in the euro zone rose in December at the
fastest pace in 10 months, suggesting that the U.S.
slowdown has yet to spill over to Europe and
damping speculation of a cut in European interest
rates.
Factories raised production by 2 percent, the European
Union statistics office said, dwarfing the
0.4 percent rise forecast by economists in a Bloomberg
News poll. New figures put November's
increase at 1.2 percent, twice the gain originally
reported.
``Fears the euro-zone economy is about to fall off a
cliff were misplaced,'' said Peter Dixon, an
economist at Commerzbank AG, in an interview on
Bloomberg Television. ``A cut in interest
rates is not absolutely necessary. It will take time
for the slowdown in the world economy to
filter through'' to Europe.
The European Central Bank held its main rate at 4.75
percent last week, declining to match cuts
in the U.S., U.K. and elsewhere. Twenty of 26
economists surveyed by Bloomberg predict that
slowing global growth and declining European inflation
will trigger a reduction in borrowing costs
by the end of June.
The case for a rate cut is ``not that convincing,''
central bank council member Ernst Welteke said
yesterday, referring to the rise in oil prices and the
apparent stall in the euro's recovery.
Most analysts expect euro-zone growth to subside to 2.5
percent to 3 percent in 2001 from
around 3.5 percent last year. With forecasts for U.S.
growth hovering around 2 percent, the euro
economy would outpace the U.S. for the first time in a
decade.
So far, the euro zone has shown some resilience to the
U.S. slowdown. Italy's economic
expansion accelerated in the fourth quarter, lifting
the growth rate for 2000 to the highest level in
five years.
Order Backlog
``Our order books are probably as full for this time of
the year as they ever have been,'' said Gary
McGann, chief operations officer at Dublin-based
Jefferson Smurfit Group Plc. Demand for
Smurfit's containerboard, a type of cardboard used to
package goods ranging from cement bags to
wine, was particularly strong in Italy and Germany last
year, McGann said.
Also pointing to a pickup in production, French
manufacturers raised investment by 11 percent
in 2000, the biggest gain since 1990, and companies
created a record 517,400 jobs, reports last
week showed.
``We don't think that European markets in our sector
will be too impacted by a slowdown this
year,'' said Yves Rene Nanot, chief executive of
Ciments Francais SA, France's second-largest
cement company.
Airbus Industrie, which builds large civil aircraft,
has said it plans to boost production this year
to 334 planes from 311 last year. Overall it's seeking
to raise production to an average of 38
aircraft a month by 2003 from 26 today.
Those increases come even as the world's two big
aircraft makers are predicting a significant drop
in new-airplane orders this year. That's because the
lag time between orders and deliveries is
generally about two years.
Eternal Vigilance
Even as growth eases, the ECB needs to be ``vigilant''
about inflation, which is unlikely to fall
below the bank's 2 percent tolerance threshold soon,
said central bank council member Guy
Quaden.
``Even after being raised, we can't regard the ECB's
interest rates as penalizing economic growth,''
said Quaden, the head of Belgium's central bank.
Italian consumer prices rose 0.4 percent in February
from the month before and 3 percent from a
year earlier, data from 11 cities showed, giving the
ECB another reason to hold off. Italian
inflation has exceeded the ECB's ceiling for 15 months.
Euro-zone inflation ran at an annual pace
of 2.6 percent in December.
The ECB last cut rates in April 1999. It then raised
rates seven times to fend off the combined
effects of oil prices, which more than tripled between
January 1999 and October 2000, and a
weaker euro, which shed more than a quarter of its
value over the same period.
Oil Prices
Since then, the price of Brent crude oil has fallen by
more than a fifth while the euro has
rebounded by 11 percent from its low. This gives the
ECB leeway to follow the U.S. Federal
Reserve, which has cut borrowing costs twice this year
by a total of 1 percentage point.
Still, in a sign that investors have scaled back
rate-cut expectations, the implied yield on
three-month Euribor futures contracts for June delivery
has risen to 4.50 percent from as low as
4.19 percent on Jan. 5.
The euro zone now comprises 12 countries after Greece
joined on Jan. 1. The figures released
today apply only to the original 11 members. Greece
will be added into the January statistics.
In today's report, three countries, including Germany
and France, reported increases below the 2
percent average. Three others, including Spain,
reported decreases. Figures from another two
weren't included.
Christoph Walkner, a Eurostat economist, said the
overall calculation is based seasonal
adjustment methods that differ from national methods.
Industrial production in the euro region rose 8 percent
in December from a year earlier.
Production in the 15-nation EU increased 1.4 percent in
December and was up 7.2 percent in the
year, the statistics office said. |
