August 6, 2013 / 11:01 AM / 7 years ago

UPDATE 1-German industry orders surge on big-ticket demand

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BERLIN, Aug 6 (Reuters) - German industry orders beat forecasts in June, posting their biggest rise since October, as contracts for big-ticket items jumped and euro zone demand rebounded, suggesting manufacturing is gradually picking up after a weak start to the year.

Manufacturing, which makes up around one fifth of Europe’s biggest economy, struggled earlier this year but Tuesday’s data, combined with a survey last week showing the sector expanded at its fastest rate in 1-1/2 years in July, offers some hope that it is regaining traction.

Contracts jumped by 3.8 percent on the month in June, data from the Economy Ministry showed. That was far better than the consensus forecast in a Reuters poll for a 1.0 percent rise, and overshot even the highest estimate for a 2.5 percent increase.

The ministry attributed the jump to an increase in orders for big-ticket items, some of which came from the Paris Air Show and said without such large orders, contracts would have declined by 0.7 percent on the month.

But economists said the data nonetheless suggested German industry was growing, especially as some sectors like the car industry grew decently in the second quarter even without the large orders.

“That’s a really strong increase and suggests the euro zone and Germany are on the road to recovery, as has already been suggested by sentiment indicators,” said Thilo Heidrich, an economist at Postbank.

“The economy in the single currency bloc probably exited its recession in the second quarter and we will see a gradual economic recovery in the second half.”

Orders from the euro zone increased by 10 percent and domestic demand also rebounded after a slump in May.

But German industrial firms have remained cautious during the current earnings season, with many like chemicals maker and Lanxess complaining about weak demand in China and Europe, though some, like Daimler, look to be recovering after a poor start to the year.

The Statistics Office said the big increase in orders was largely due to Airbus orders from the euro zone and bookings for rail vehicles from outside the single currency bloc.

While Germany propped up growth in the euro zone during the early years of the region’s crisis, it has since faltered and the economy only narrowly avoided a recession at the start of 2013. Even a recovery in the German manufacturing sector this year is unlikely to be able to hold up the rest of the bloc.

Recent data has pointed to the domestic economy picking up, with consumer morale brightening, unemployment falling, business sentiment improving and the private sector expanding, though investor confidence has slipped and inflation has picked up.

The German economy is in good shape compared with its peers within the euro zone like Italy, where data on Tuesday showed the economy had contracted for eight consecutive quarters.

A Reuters poll last month showed Germany could post industry output growth of 0.9 percent on the year in 2013 as long as the euro zone’s troubles remain at bay. (Reporting by Michelle Martin; Editing by Erik Kirschbaum and Madeline Chambers)

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