Data shows fragile state ofGerman economic recovery

5th August 2004, Comments 0 comments

5 August 2004 , BERLIN – Key German data released Thursday showing a drop in factory orders and a fall in crucial car sales have underscored the fragile state of the recovery underway in Europe's biggest economy.

5 August 2004 

BERLIN – Key German data released Thursday showing a drop in factory orders and a fall in crucial car sales have underscored the fragile state of the recovery underway in Europe's biggest economy.

German factory orders dropped by a larger-than-expected 3.5 percent in June, the nation's Ministry for Economics and Labour said Thursday.

Economists had forecast a fall of 0.3 percent with the month-on-month decline in June led by a slump in foreign orders.

While often volatile, Germany's monthly order book data is considered by analysts to be a key economic indicator for the nation.

The publication of the order book data coincided with the release of car sales figures by Germany's car industry association (VDA), which showed new car sales dropping seven percent last month with surging oil prices and high unemployment leading consumers to shy away from showrooms.

The fall in new car sales is likely to add to concerns about the impact of the recent surge in oil prices on the pace of the recovery that began to emerge last year and the current sluggish state of consumer demand in Germany.

The release of the figures follows the publication of data Wednesday underscoring the continued grim state of Germany's labour market with unemployment in the nation creeping up to 10.5 percent in July from 10.2 percent in June.

To date, exports have been the key driving force behinds growth in Germany, helping to haul the nation out of three years of economic stagnation.

However the economics ministry data showed June foreign orders dropping by 6.5 percent and domestic demand fell by 0.8 percent.

But despite the fall in June, many economists are expecting the number of factory orders to rebound in the coming months with the ministry pointing to a relatively low number of big ticket orders as a key reason for the fall and adding that the data is likely to be revised higher.

The June fall followed a 1.5 percent rise in May and a 1.9 percent increase in April. German factory orders rose more than four per cent in June compared to the same month last year.

In a two-month comparison, which the ministry says helps to iron out short-term fluctuations, overall orders rose 0.6 per cent in May and June compared to March and April.

Foreign orders jumped 2.3 percent during the two-month period while domestic orders dropped 0.9 percent.

Despite the June fall in orders and car sales, many economists have been revising upwards their growth forecasts for the nation with some analysts believing that growth could hit three per cent next year.

The Organisation for Co-operation and Development on Thursday became the latest group to revise up its German growth forecasts with the Paris-based institute saying it now expects the nation's economy to expand by between 1.5 percent and two percent this year.

Previously the OECD had forecast a growth rate for Germany of barely 1.5 percent.

The car industry association's figures showed car sales falling to 267,000 units in July while car production dropped 10 percent to 400,400 vehicles and exports declined 7 percent to 298,200 units.

New car sales in Germany over the last seven months fell two per cent to 1.92 million units with demand for German brands falling three per cent to 1.24 million cars.

DPA

Subject: German news

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