Bloomberg News

German Factory Orders Unexpectedly Fell a Second Month in August

October 06, 2011

Oct. 6 (Bloomberg) -- German factory orders unexpectedly fell for a second month in August as domestic demand waned.

Orders, adjusted for seasonal swings and inflation, declined 1.4 percent from July, when they dropped 2.6 percent, the Economy Ministry in Berlin said in a statement today. Economists forecast no change from the previous month, according to the median of 36 estimates in a Bloomberg News survey. In the year, orders rose 3.9 percent when adjusted for work days.

Concerns that Europe’s debt crisis and slowing global growth could drag the economy back into recession may prompt companies to put off investment. European confidence in the economic outlook dropped to the lowest in almost two years last month. At the same time, German business sentiment fell less than forecast, suggesting Europe’s largest economy may be spared a slump.

“There is the danger that the market nervousness about the debt situation will affect companies more strongly,” said Jens Kramer, an economist at NordLB in Hanover, Germany. “That doesn’t necessarily mean a recession. We shouldn’t talk one into existence.”

While domestic factory orders fell 3.2 percent in August, the ministry said holidays affected demand and there was a below-average number of big-ticket sales. Orders from abroad rose 0.1 percent, with sales to other euro-area nations gaining 2.7 percent. Orders for investment goods declined 1.3 percent and orders for consumer goods dropped 5.6 percent. The drop in overall orders in July was revised from 2.8 percent.

‘One-Off Effects’

“Manufacturing demand has been influenced by one-off effects in recent months,” the ministry said. Demand in the three months through August compared with the previous three- month period showed a gain of 1.5 percent, it said. “Still, overall the orders dynamic has noticeably lost momentum.”

Railroad equipment maker Vossloh AG said on Sept. 29 that it reduced its sales forecast for 2011 for a second time due to lower orders from southern Europe and “weak” Chinese demand.

At the same time, Daimler AG, the world’s largest maker of heavy-duty vehicles, said demand for Mercedes-Benz trucks hasn’t shown signs of being damped by slowing economic growth.

“In spite of the debt crisis, we have good reason to be optimistic,” Chief Executive Officer Dieter Zetsche said in a speech on Sept. 30. Mercedes-Benz truck plants will be working at full capacity through the end of this year and have “a good level” of orders for the first quarter, he said.

Heightened Danger

Euro-area services and manufacturing output shrank for the first time in more than two years in September. The euro-area economy may fail to gather strength in the current quarter, expanding 0.2 percent from the previous three months before cooling to 0.1 percent growth in the final quarter, the European Commission in Brussels forecast last month.

Bundesbank President Jens Weidmann said on Sept. 26 there is a “heightened danger” that financial market turmoil caused by uncertainty over the debt crisis will begin to affect the real economy.

European governments this week hinted that bondholders may be saddled with bigger losses on Greek debt, intensifying market jitters that a second aid package designed to quell the fiscal crisis might unravel. France and Belgium are considering a second bailout of Dexia SA after the crisis reduced its ability to obtain funding.

While the Bundesbank’s current forecast is for the German economy to expand about 3 percent this year, it said last month that the outlook “has clouded more than previously expected.”

“Growth in the second half of the year will be significantly weaker than in the first,” said Ralph Solveen, head of economic research at Commerzbank AG in Frankfurt. “We still think that Germany will be able to dodge a recession.”

--With assistance from Kristian Siedenburg in Vienna, Richard Weiss and Alex Webb in Frankfurt. Editors: Matthew Brockett, Simone Meier

To contact the reporter on this story: Jeff Black in Frankfurt at

To contact the editor responsible for this story: Craig Stirling at

The Aging of Abercrombie & Fitch
blog comments powered by Disqus