Steep drop in German orders points to eurozone slowdown

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A steep drop in German industrial orders published on Friday rang a warning bell for the entire eurozone as the 16-nation bloc braced for weaker growth in the final months of the year.

The economy ministry said orders in the biggest European economy plummeted by 4.0 percent in September from the previous month, the sharpest fall since January 2009, with orders from eurozone partners more than 13 percent lower.

The overall fall was fare bigger than a forecast decline of 0.4 percent compiled by Dow Jones Newswires and erased a revised gain of 3.5 percent in August.

A breakdown of the numbers showed the biggest single decline, of 20.4 percent, in eurozone orders for investment goods, those used to make final products.

"Contrary to the previous month, only a modest number of large orders were recorded in September," a ministry statement said.

One bright spot was nonetheless seen in the two-month sliding average which is calculated to even out volatile one-off developments, and which edged up by 0.6 percent in August and September from June-July.

"The growth dynamic in industrial orders has weakened considerably as expected, following the boom in the first half," the ministry said.

It noted however that "the trend is still oriented upwards."

Germany has forecast overall growth of 3.4 percent in 2010 owing in large part to strong gains in the first six months of the year.

On Thursday meanwhile, the eurozone purchasing managers index (PMI) compiled by London-based data and research group Markit slumped to an eight-month low of 53.3 points, another sign that economic growth was set to weaken.

Although manufacturing output expanded further, it was offset by weaker growth at service providers, Markit said.

© 2010 AFP

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