German factory orders declined more than twice as much as economists forecast in June as sales to euro-area countries slumped.
Orders, adjusted for seasonal swings and inflation, dropped 1.7 percent from May, when they rose 0.7 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.8 percent decline, according to the median of 35 estimates in a Bloomberg News survey. From a year earlier, orders fell 7.8 percent when adjusted for work days.
Today’s report is the latest to show Europe’s largest economy is cooling as the sovereign debt crisis erodes demand for its goods, hurting earnings at companies including Bayerische Motoren Werke AG (BMW), Daimler AG and Siemens AG. While the Bundesbank last month estimated moderate growth in the second quarter, aided by domestic spending, the manufacturing industry is contracting and business confidence fell for a third straight month in July.
“All in all, quite a gloomy report,” said Annalisa Piazza, an economist at Newedge Strategy in London. “Exports are badly hit by the current cyclical slowdown and the export- led German industrial sector is not going to be spared from the slump in trade activity.”
The euro was little changed after the report, trading at $1.2405 at 12:10 p.m. in Frankfurt.
Orders from the euro region sank 4.9 percent in June after jumping 7.8 percent in May, today’s report showed. Domestic orders fell 2.1 percent, while demand from non-euro nations rose 0.6 percent. The economy ministry said overall orders in the second quarter “slightly” exceeded those in the first quarter and there is currently no clear trend.
Rising wages and unemployment at a two-decade low are supporting domestic spending, helping to offset waning export demand. The Bundesbank in June predicted German growth of 1 percent this year. By contrast, the European Commission forecasts a 0.3 percent contraction for the 17-nation euro economy as a whole.
With the global economy cooling and the debt crisis hurting spending in the euro region, German companies are feeling the pinch.
Daimler, the world’s third-largest maker of luxury vehicles, last month reported a 13 percent decline in second- quarter operating profit. Volkswagen AG, Europe’s largest car maker and the owner of the Audi brand, on July 26 reported slowing earnings growth as the impact of the debt crisis weighed on demand in its home region.
“Global economic conditions might deteriorate in the face of the euro crisis and high government debt,” BMW Chief Executive Officer Norbert Reithofer said on Aug. 1 after the company reported its first drop in quarterly operating profit in almost three years.
“Germany can’t escape the crisis and that has been shown by a consistent deterioration in recent data,” said Nick Kounis, chief European economist at ABN Amro Bank NV in Amsterdam. “At the same time, the country will not fall into a massive recession. It’ll be a long, drawn-out period of flattish growth.”
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