German industrial orders surge in August

6th October 2010, Comments 0 comments

German factories raked in foreign orders at a brisk pace in August when demand for German goods jumped 3.4 percent in another signal Europe's biggest economy was on the mend, official figures showed Wednesday.

The August surge beat expectations, fully compensating for a decline of 1.6 percent in July, and pointed to deepening recovery in the eurozone.

Analysts polled by Dow Jones Newswires had forecast an increase of just 1.1 percent. The stronger result suggested that German industrial output will remain in positive territory in the months to come.

The result for August "was underpinned by a higher than usual number of large orders in the mobility sector" that includes trains, ships and aircraft, a ministry statement said.

Foreign demand again came through for the world's second-biggest exporter after China, with an increase of 6.6 percent, while domestic orders gained a much more modest 0.5 percent, the figures showed.

Eurozone partners accounted by far for the biggest share of international demand, "further evidence that the eurozone recovery is broadening," according to ING senior economist Carsten Brzeski.

In Brussels, the European Union's statistics service confirmed meanwhile that the eurozone economy had grown by 1.0 percent in the second quarter from the first three months of the year, the bloc's best performance since mid 2006.

A breakdown of the German data by sector revealed the biggest gain in orders for capital goods used to make finished products, which were 6.7 percent higher, the economy ministry said.

Orders for consumer goods fell however by 3.9 percent, which combined with the weak result in domestic demand cast a shadow over the contribution German consumption might make to overall growth.

A two-month aggregate calculation based on a 12-month comparison was particularly striking because Germany was still in the midst of a historic recession last year.

The figure for July and August 2010 was thus 19.4 percent higher than in the same period one year earlier.

"Strong fluctuations in large contracts always have an effect on industrial order figures," the ministry acknowledged.

"But even taking that into account, demand for industrial goods remains oriented higher," it added, while noting that domestic demand had calmed significantly since May.

UniCredit economist Alexander Koch forecast that while a global economic recovery would become more moderate it would not become a fresh downturn.

That should guarantee "further expansion in demand for German industrial products," he said.

Commerzbank's Ralph Solveen cautioned however that the upwards trend in industrial orders "has been climbing at a noticeably flatter angle."

But Brzeski concluded on an upbeat note, saying: "Today's numbers should hush any doubts on the sustainability of the German recovery. The industry-led recovery will not run out of fuel any time soon."

© 2010 AFP

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