First 2011 fall in German orders

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German industrial orders plunged a surprise four percent in March month-on-month, the first fall this year, official figures showed on Thursday.

Economists surveyed by Dow Jones had expected orders in Europe's biggest economy to be unchanged from February. Domestic orders fell 3.5 percent and by 4.3 percent from abroad, the economy ministry said.

In February, orders had climbed a revised 1.9 percent from January, compared with the previously reported 2.4-percent rise. In January they soared 3.1 percent month-on-month.

The figures were adjusted for inflation and seasonal and calendar effects. The ministry said that there was a significantly under-average number of large orders in March, something which might have skewed the data.

On a less volatile two-monthly comparison, orders were a seasonally adjusted 1.4 percent higher in February and March compared to December and January, the government said.

For the first quarter as a whole, orders were 2.3 percent higher than in the first three months of 2010.

"Despite the recent fall, the recovery trend is continuing," the ministry said, calling the drop in March part of a "normalisation" in Europe's powerhouse after the record recession of 2009 and the strong rebound last year.

Output plunged a record 4.7 percent in 2009 but rose 3.6 percent in 2010.

Dirk Schumacher, senior European economist at bank Goldman Sachs, also cautioned against writing off the German economy just yet.

"This is a volatile series and large monthly changes may occur. We would need at least two months of declines before being able to asses whether any material change has occurred," Schumacher said.

He added that business sentiment remained strong, with the latest reading of the closely watched Ifo survey suggesting industrial orders resumed their upwards trend in April.

Andreas Rees, chief Germany economist at Unicredit, said that the drop in March was the steepest decline since January but that orders data are often volatile during an upswing.

"Although even our below-consensus forecast turned out to be too optimistic, we think that there is no reason to worry or even to panic," Rees said in a research note.

"This is not the end of the upswing but only a short -- but admittedly brutal -- interruption... The latest new orders figure does not mark a turnaround in the business cycle."

He added that he expected a slowdown to set in only at the end of the year, as indicated by the Ifo survey.

Other recent data have been more positive.

Orders for the important German machine tools sector surged 32 percent in the first quarter compared to the first three months of 2010, sector federation VDMA said on Tuesday, predicting it would create 20,000 jobs this year.

German retail sales however showed the biggest monthly drop in March since January 2009, data revealed on Friday, but economists again warned that the numbers were volatile.

© 2011 AFP

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