UPDATE 2-Euro zone demand pushes German industry orders higher

Wed Feb 6, 2013 8:46am EST

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BERLIN Feb 6 (Reuters) - German industrial orders climbed in December as demand from the euro zone rebounded, underscoring improving conditions in the currency bloc and the resilience of Europe's largest economy.

The 0.8 percent rise in orders on the month backs up surveys showing stronger German business morale and offers further support to European Central Bank chief Mario Draghi's assertion that the euro zone economy will recover later this year.

"These new order data add clear evidence that German industry has reached a turning point," said Carsten Brzeski, senior economist at ING.

"It looks as if the new optimism of German businesses is based on facts and orders and not on hot air."

The rise in orders was slightly below the mid-range forecast in a Reuters poll of economists for a 0.9 percent rise in the seasonally and price-adjusted figure published by the Economy Ministry on Wednesday. Orders fell 1.8 percent in November.

The latest Ifo survey showed morale among German businesses improving in January to its highest in more than half a year and a purchasing managers' survey released last week showed the manufacturing sector shrank slightly in January but output and new business grew.

Wednesday's data show industrial orders from the euro zone rose by a hefty 7.0 percent in December, with countries using the shared currency placing 11.6 percent more orders for German capital goods, needed for example to boost factory productivity, and 7.0 percent more consumer goods.

That was likely helped by an improvement in euro zone sentiment, which rose for a sixth straight month heading into February according to the latest Sentix survey, which also showed expectations rising to their highest level since June 2007, before the financial and debt crises struck.

Domestic orders fell by 1.2 percent, driven by a 4.8 percent decline in consumer goods orders, putting a dampener on hopes that private consumption can prop up German growth.

SIGNS OF RECOVERY

Germany's economy shrank by 0.5 percent in the last three months of 2012, according to preliminary data, but economists see the economy eking out a little growth in the first quarter of this year and therefore escaping recession, defined as two consecutive quarters of contraction.

"Together with a significant increase of the most important sentiment indicators, (today's data) suggest that the German economy will return to growth in the first quarter," said Christian Lips, an economist at NordLB.

"We can even expect a marked acceleration in economic growth in spring," he added.

The Economy Ministry said orders had picked up in the fourth quarter of 2012, boding well for industrial output this year.

Combined with an improvement in business climate in the manufacturing sector, the orders data point to a foreseeable end to the weak phase in industry, it added.

Recent data has shown Germany's private sector expanding at its fastest rate since June 2011, investor sentiment brightening, consumer morale taking a turn for the better and unemployment falling.

Industrial output rose by a modest 0.2 percent in November and economists expect data due at 1100 GMT on Thursday to show it edged up by a further 0.2 percent in December. (Reporting by Michelle Martin, editing by Gareth Jones and Ruth Pitchford)

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