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Domestic demand spurs recovery in German industrial orders
April 6, 2017 / 6:25 AM / 7 months ago

Domestic demand spurs recovery in German industrial orders

BERLIN (Reuters) - German industrial orders picked up in February after plummeting the previous month and the Economy Ministry said an upturn in the sector was on the cards, although the rise in contracts for factories in Europe’s largest economy was weaker than expected.

FILE PHOTO: A steel-worker is pictured at a furnace at the plant of German steel company Salzgitter AG in Salzgitter, Lower Saxony on March 17, 2015. REUTERS/Fabian Bimmer/File Photo

Bookings rose 3.4 percent on the month, Economy Ministry data showed on Thursday. That missed the Reuters consensus forecast for a 4.0 percent increase but followed an upwardly revised drop of 6.8 percent in January.

The data comes after a survey that showed manufacturing growth reached its highest level in almost six years in March, driven by an increase in orders for intermediate goods, suggesting the sector will contribute to an economic expansion in the first quarter.

“German new orders have woken up from hibernation,” said ING economist Carsten Brzeski, adding that bookings seemed to be extremely sensitive to seasons and the weather.

“Looking through this high volatility, the trend for order books is slightly positive, though still not as positive and strong as current confidence indicators are suggesting.”

February’s increase was driven by the strongest surge in domestic demand since May 2011, with companies in Germany ordering 8.1 percent more goods than they ordered in January, when they had significantly scaled back orders.

Foreign orders failed to contribute, with a breakdown showing bookings from the euro zone fell by 2.4 percent while non-euro zone contracts increased by 1.6 percent.

But Sophia Krietenbrink, economist at Germany’s DIHK Chambers of Commerce, said international political risks seem to be having hardly any impact on well-filled German order books.

The German economy faces numerous risks this year - ranging from unpredictable elections at home and in France to protectionist trade policies under U.S. President Donald Trump and Britain’s Brexit negotiations.

Nonetheless, forward-looking data has given reason for optimism too, with business morale hitting its highest level in nearly six years and the mood among investors improving.

A breakdown of the February data showed demand for intermediate goods soared while appetite for consumer products rose and contracts for capital goods edged up.

“The increase in orders was important - otherwise concerns about production would definitely have been warranted,” said Alexander Krueger, economist at Bankhaus Lampe.

Output data due out on Friday is expected to show factories churned out 0.1 percent fewer goods in February.

The Economy Ministry said that in the less-volatile two-month comparison for January/February compared with November/December, orders declined by 2.4 percent, with domestic and foreign orders equally to blame. But it said it expected the industrial sector’s performance to improve slightly.

Other recent data has shown unemployment falling, retail sales rising and growth in services accelerating, though engineering orders were flat in February as domestic orders dropped.

Additional reporting by Rene Wagner; Writing by Michelle Martin, editing by Larry King and Angus MacSwan

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