February 5, 2015 / 7:44 AM / in 3 years

UPDATE 1-German industry orders surge to highest level in over 6.5 yrs in Dec

(Adds detail, context, economist quote)

BERLIN, Feb 5 (Reuters) - German industrial orders surged far more than forecast in December, recovering from a sharp fall the previous month and hitting their highest level since April 2008, which should help Europe’s largest economy to gain steam in early 2015.

Bookings for goods made in Germany climbed by 4.2 percent, according to data from the Economy Ministry on Thursday. It beat a Reuters consensus forecast for a 1.5 percent gain and overshot even the highest estimate for a 3.0 percent increase.

That was the sharpest rise since July and came after a 2.4 percent drop in November.

“Although the outlook for German industry still looks mixed at the moment, there are increasing signs that we’ll see an economic upturn in the spring,” said Thomas Gitzel, chief economist at VP Bank.

Of the increase in orders, he said: “The weaker euro should ensure that this isn’t just a flash in the pan but rather the start of a solid upward trend.”

The increase was driven by solid rises in both foreign and domestic demand. Euro zone demand climbed particularly strongly.

Capital goods contracts posted strong gains while factories churning out intermediate goods also received more new orders but consumer goods bookings fell.

The German economy grew by 1.5 percent overall in 2014. Its performance was patchy in the middle of the year and the economy came close to a recession in the third quarter, when it expanded by just 0.1 percent after contracting in the second.

It likely grew by around 0.25 percent in the fourth quarter, the Federal Statistics Office has estimated. Recent sentiment indicators showing business and investor morale improving suggest the economy could perform better in early 2015.

Christiane von Berg, an economist at BayernLB, said the economy would likely expand by 0.4 percent in the first quarter.

On Tuesday data showed engineering orders surged by 13 percent in real terms in December from the previous year thanks to strong demand from foreign markets. (Reporting by Michelle Martin; Editing by Stephen Brown)

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