Bloomberg News

German Factory Orders Unexpectedly Rose on Euro-Area Demand

July 05, 2012

German May Factory Orders Unexpectedly Rose on Euro-Area Demand

German business sentiment fell to the lowest in more than two years in June and manufacturing is contracting at the fastest pace in three years. Photographer: Guenter Schiffmann/Bloomberg

German factory orders unexpectedly rebounded in May, driven by demand from the euro region.

Orders, adjusted for seasonal swings and inflation, rose 0.6 percent from April, when they declined a revised 1.4 percent, the Economy Ministry in Berlin said today. Economists forecast orders would hold steady in May, according to the median of 36 estimates in a Bloomberg News survey. From a year earlier, orders fell 5.4 percent when adjusted for work days.

German exports and record-low unemployment have helped insulate Europe’s largest economy from the region’s debt crisis. Still, recent data show its resistance is buckling. Business sentiment fell to the lowest in more than two years in June and manufacturing is contracting at the fastest pace in three years. The European Central Bank may cut interest rates today in an effort to stimulate growth and lending.

“Germany is not immune to the European debt crisis,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “It does not seem that domestic sales will rise enough to offset weakening foreign demand as economies around the globe are cooling.”

The euro was little changed after the release, trading at $1.2510, down 0.2 percent on the day. Germany’s benchmark DAX Index (DAX) advanced 0.6 percent at 12:01 p.m. in Frankfurt.

Orders from the euro region jumped 7.7 percent in May after dropping 1.3 percent in April, today’s report showed. Domestic orders fell 1.3 percent in the month and demand from non euro- region nations slipped 0.8 percent.

‘Stronger Impulses’

Sales of investment goods rose 0.2 percent, with orders from the euro region jumping 11 percent, the ministry said. Orders of consumer goods rose 3.5 percent, with those from the euro area surging 10.9 percent. Shipments of consumer goods to non-euro countries rose 6.2 percent.

“Industrial orders continue to point upward,” the ministry said in the statement. “With some big swings due to orders of big-ticket items in some months, the slightly stronger impulses come from abroad. There’s also a solid order dynamic at home.”

Rising wages and unemployment at a two-decade low have helped support domestic demand. The Bundesbank last month raised its 2012 growth forecast to 1 percent from 0.6 percent, citing domestic consumption. That compares with a European Commission forecast for a 0.3 percent economic contraction in the euro area as a whole.

More Cautious

Still, there are signs the debt crisis is making German consumers and executives more cautious.

Infineon Technologies AG (IFX), Europe’s second-largest semiconductor maker, said last month that revenues declined in the three months through June amid global economic uncertainty. Bayerische Motoren Werke AG’s head of sales and marketing in Germany, Karsten Engel, said on May 31 that Germany’s car market won’t grow in 2012 as the crisis curbs spending.

“Sentiment in the German economy has deteriorated massively,” said Rainer Sartoris, an economist at HSBC Trinkaus & Burkhardt AG (TUB) in Dusseldorf. “German exporters are suffering as the economies of Spain and Italy plummet and the global economy loses momentum.”

To contact the reporter on this story: Joseph de Weck in Frankfurt at jdeweck@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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