* Less new contracts for 'Made in Germany' goods than
* Domestic demand falls while euro zone orders rise
* Overall development points to weak output in autumn
* Ifo says German current account surplus to hit record high
* Schaeuble rejects criticism that Berlin should spend more
(Adds current account surplus forecast, Schaeuble, reactions)
By Michael Nienaber
BERLIN, Sept 6 German industrial orders eked out
a smaller-than-expected rise in July and showed a decline in
domestic demand, underlining growing concerns that Europe's
economic powerhouse is slowing down.
Contracts for goods "Made in Germany" were up by 0.2 percent
in July, the Economy Ministry said on Tuesday. That was weaker
than a Reuters consensus forecast for a rise of 0.5 percent.
Domestic demand fell by 3.0 percent while foreign orders
rose by 2.5 percent, with demand from euro zone countries
jumping by 5.9 percent.
"Domestic demand for goods is disappointing again," DIHK
economist Sophia Krietenbrink said, adding that the data pointed
to weaker consumption in the coming months.
The surprisingly low order intake from home added depth to a
picture of lacklustre investment among German companies while
European peers seem more willing to open their pockets.
This was also reflected in a forecast by the Munich-based
Ifo institute for Germany's current account surplus to hit a new
record of $310 billion (278 billion euros) in 2016, overtaking
that of China again to become the world's largest.
Ifo economist Christian Grimme said exports exceeded imports
by $159 billion in the first half of the year, mainly due to
strong demand from other European countries.
The institute said the German surplus would be equivalent to
around 8.9 percent of gross domestic product, meaning it would
once again breach the European Commission's recommended upper
threshold of 6 percent.
This is likely to fuel the debate about Germany's economic
role. Brussels and Washington have urged Berlin repeatedly to
lift domestic demand to help reduce global economic imbalances.
Speaking in parliament to present the federal budget,
Finance Minister Wolfgang Schaeuble rejected such criticism,
saying Berlin was massively increasing state spending while also
implementing other measures to lift domestic demand.
"We are playing our part in strengthening global demand. No
other country in Europe is spending more on investment than
Germany," Schaeuble said.
"Just because some countries in Europe are taking on more
debt, it doesn't mean they are investing more."
He did say, however, that tax cuts may be in the offing
after next year's federal election.
The German government introduced a national minimum wage in
2015 and decided to raise pension entitlements in 2016 by the
strongest rate in more than two decades. In addition, Berlin
increased state spending on roads, digital infrastructure and
BREXIT AND TRUMP
The industrial orders data was the first for a full month
since Britain's vote to leave the EU.
"Economic and political uncertainty are dampening order
activity around the globe," VP Bank economist Thomas Gitzel
said, adding that Britain's 23 June vote was only one negative
factor among several others.
"With U.S. presidential candidate Donald Trump, the next
uncertainty is around the corner," Gitzel said, pointing to
Trump's sharp rhetoric against free trade. The United States is
Germany's most important export market.
The Economy Ministry said that the development of incoming
orders was lacklustre so far this year, suggesting industrial
activity would be rather weak in autumn.
The ministry provided no single data on how orders from the
UK developed in July. But a regional breakdown showed that
demand from countries outside the euro zone rose by only 0.6
percent after an increase of 3.8 percent in June.
HSBC Trinkhaus economist Jana Meier said uncertainty about
the future relationship between Britain and the remaining 27 EU
members was likely to weaken investment in the medium term.
Economists are divided on how much Brexit will weaken German
exports and consequently lower growth rates in the coming
quarters. Britain is Germany's third-most important export
The DIW economic institute expects economic growth to ease
to 0.3 percent in the third quarter from 0.4 percent in the
three months to June, partly because of Brexit.
For 2016 as a whole, the government expects rising private
consumption and higher state spending to drive an overall growth
of 1.7 percent, on a par with last year.
For 2017, Berlin expects growth to slow to 1.5 percent as
weaker exports are expected to hit manufacturers.
(Additional reporting by Rene Wagner Editing by Jeremy Gaunt)