Tue, Feb 07, 2017 - Page 10 News List

German industry orders rise at fastest pace in two years

Reuters, BERLIN

Higher demand for capital goods at home and abroad drove the biggest monthly increase in German industrial orders in around two and a half years in December last year, suggesting factories will support growth in Europe’s biggest economy in the coming months.

The much stronger than expected data, released by the German Ministry for Economic Affairs, gave some reassurance that Germany’s economic upswing will carry into this year, despite growing political uncertainties, such as a protectionist US trade agenda.

“What a sensationally strong quarter in the manufacturing sector,” Sal Oppenheim economist Ulrike Kastens said, adding that the figures were pointing to an overall economic recovery in the eurozone.

ROBUST

“Despite the political uncertainties, the German economy is showing a more than robust development,” Kastens said, adding she now expects quarterly growth of about 0.6 percent in the first quarter of this year after 0.5 percent in the final quarter of last year.

Contracts for goods made in Germany were up by 5.2 percent on the month, the ministry said.

That was the biggest monthly increase since July 2014 and was far stronger than the Reuters consensus forecast for a rise of 0.5 percent.

Domestic demand jumped by 6.7 percent, while foreign orders increased by 3.9 percent, with bookings from eurozone countries soaring by 10.0 percent.

The data for November last year was revised down to a fall of 3.6 percent from a previously reported drop of 2.5 percent.

Still, over the full fourth quarter, industrial orders rose by 4.3 percent on the quarter, the ministry said.

“This signals a continued upswing in the industrial sector over the winter,” the ministry said.

MORALE

The overall increase was driven by a jump in demand for capital goods of 9.7 percent, helped by strong bookings from both domestic customers and eurozone countries.

The strong orders figures followed mixed data after German business morale unexpectedly fell last month, signaling a more downbeat assessment of the outlook for Europe’s largest economy.

A survey among German purchasing managers showed last week that private sector growth slowed slightly last month, with weaker activity among services firms limiting overall economic expansion.

Strong private consumption, increased state spending on refugees and higher construction investment helped the German economy to grow by 1.9 percent last year — the strongest rate in half a decade.

For this year, the government expects an economic slowdown to 1.4 percent due to fewer workdays and weaker exports.

ING economist Carsten Brzeski suggested viewing the data with caution as it is a highly volatile indicator, but added: “Against the background of Brexit and Trump, today’s data suggest that the German industry could shift into a higher gear in the first quarter of 2017.”

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