German Industrial Orders Jump in June

Foreign orders increased 8.3%

German industrial orders increased by 4.5% in June in following a 4.4% rise in May, the economy ministry said on August 6.

"The strength in demand came in the end from foreign orders which increased by 8.3%," despite a rise in the euro's value, the ministry said, especially good news for the country's export-oriented economy. "After a collapse last winter, industrial orders have risen for the fourth month in a row. The strongest demand has come from abroad but domestic orders are also picking up markedly," it added.

Recent economic indicators have been particlarly positive in Germany, suggesting it could pull out of its worst recession in 60 years more quickly than previously thought. "The surprisingly good result in industrial orders bodes well for industrial production in the coming months," Postbank analyst Thilo Heidrich commented.

The industrial order figures contained a note of caution as well, with those for big ticket items slightly below average, the ministry said. Manufacturing orders in general were 25.3% below the level of June 2008 moreover, suggesting the key sector is emerging only slowly from the country's deep recession.

But on a two-month basis which smooths out some volatility, manufacturing orders were 6.8% higher in May and June from the March-April period.

And demand for capital goods was particularly healthy in June, as orders in rose by 5% from May.

On balance, "the prospects for a pickup in industrial production in the coming months have improved further," the ministry said.

The data came a day after a key purchasing managers index for the entire 16-nation eurozone rose for the fifth month running. The Markit survey found that activity in the manufacturing and services sector posted its highest reading since August 2008, with the data buoyed by near-stabilization in Germany.

Authorities nonetheless expect economic activity to contract by around 6% for the year as a whole.

Like Japan, another big exporter, Germany has been hit hard by the global economic slump but is well positioned to benefit from a pick up in countries like China and the U.S. Following a contraction of 3.8% in gross domestic product in the first quarter, the German economy is forecast to shrink by a much smaller amount in the second, before expanding in the second half of the year. That scenario is threatened however by a possible credit squeeze and rising unemployment.

Copyright Agence France-Presse, 2009

TAGS: Trade
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