German industry orders slump as economy struggles to pick up

BERLIN Thu Jun 6, 2013 6:43am EDT

BERLIN (Reuters) - A slump in demand for capital goods at home and abroad drove a steeper-than-expected 2.3 percent drop in German industrial orders in April, underscoring how Europe's largest economy is struggling to pick up after a weak performance over winter.

The drop in seasonally and price-adjusted order intake was the strongest since November, according to data from the Economy Ministry, comparing with a consensus forecast in a Reuters poll of 38 economists for a 1 percent fall.

Recent data has painted a mixed picture of the German economy. Sentiment surveys have improved and exports, imports and output have all risen, although unemployment has also edged up and retail sales have fallen.

"The details disappoint on many levels," said Thomas Gitzel, an economist at VP Bank, pointing to the 3.2 percent fall in domestic orders and the 3.6 percent drop in orders from the euro zone, struggling through the fourth year of its debt crisis.

"The German economy is unsteady. As long as the ailing euro zone countries are not back on their feet, this will likely remain the case."

Orders had risen 2.3 percent in the previous month, the ministry said, revising the figure upwards from an initial estimate by 0.1 percentage points. Orders have risen in three of the last six months.

The German economy is still outperforming peers within the euro zone. Separate data showed the unemployment rate in the bloc's number two economy France hitting a 14-year high in the first quarter of 2013, while joblessness is still near its lowest since reunification in Germany.

The Economy Ministry said the number of big-ticket items was below average in April. Excluding such items, orders would have risen every month this year. "This suggests that the German industry is progressively overcoming its weakness," it said.

A Purchasing Managers' survey released on Wednesday showed activity in the private sector grew slightly in May although firms cut jobs as they faced a fall in new contracts.

Orders of German capital goods were down 3.6 percent in April, Thursday's data showed, falling 3.2 percent at home and 4 percent abroad, including a 7 percent slump in the euro zone.

Germany's economy propped up growth in Europe in the early years of the euro zone crisis but contracted in late 2012 and only narrowly escaped a recession by growing 0.1 percent in the first three months of this year thanks to private consumption.

The one bright spot in Thursday's data was orders of consumer goods which jumped 7.5 percent in April, driven by an 11.7 percent rise in contracts from abroad. Orders for consumer goods at home, where consumer morale is the strongest since September 2007, rose 2.4 percent.

(Additional reporting by Alexandra Hudson and Klaus Lauer; Editing by Stephen Brown)