German Industrial Orders Post Surprise Gain

Aug. 4, 2011
June was up 1.8%.

Mainly due to bulk orders from abroad, German industrial orders defied analysts forecasts by gaining 1.8% in June, official data showed on August 4.

Analysts polled by Dow Jones Newswires had expected industrial orders in the biggest European economy to decline by 1.2% after recent signs of weakness. The economy ministry revised the figure for May lower however, to a gain of 1.5% from its initial estimate of 1.8%.

In June, Germany received "a larger than average volume of big foreign orders for investment goods" which are used to make finished products or provide services, an economy ministry statement said.

Its data showed a rise of 13.7% in foreign orders from June 2010, while domestic orders fell 10.8%. That marked a reverse from the figures in May which showed a drop of 6% and a rise of 10.7%, respectively, and the strongest gain of all this time, 16.4%, was seen in demand from other eurozone countries.

While the figures are often volatile, a look at the second quarter as a whole showed an increase in orders of 3.2% from the first three months of the year.

The latest numbers "should put at least some oil on troubled waters, easing market concerns about the strength of the German and eurozone economies," ING senior economist Carsten Brzeski said. "At least the German industrial engine is not (yet) running out of fuel."

The latest eurozone purchasing managers index nonetheless indicated that the German economy is now slowing sharply, putting its level in July at a 21-month low. But Berenberg Bank senior economist Christian Schulz underscored that many German manufacturers "could probably spend a long time just working down backlogs, cushioning any slowdown in orders in the second half of the year."

Chancellor Angela Merkel has forecast growth this year on a comparable level with that of 2010, when activity expanded by 3.6%. The Bundesbank central bank expects growth of 3.1%, while the International Monetary Fund sees 3.2%.

"The resilience of German manufacturing is remarkable. The competitiveness acquired in years of austerity pays off, even in the face of rather adverse macroeconomic conditions," Schulz said. "It could be reminder that austerity serves a purpose beyond reaching fiscal sustainability. Intelligent austerity lays the foundations for sustainable growth and competitiveness in the future."

Copyright Agence France-Presse, 2011

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