July 5, 2012 / 11:22 AM / 8 years ago

UPDATE 1-German industry gets surprise euro zone boost

(Adds analysts, details, background)

By Michelle Martin

BERLIN, July 5 (Reuters) - German industrial orders unexpectedly rose in May as demand from its euro zone peers picked up, suggesting Europe’s largest economy remains resilient although economists warned greater demand from the single currency bloc would be short-lived.

Seasonally and price-adjusted order intake climbed 0.6 percent on the month, data from the Economy Ministry showed on Thursday, well above the mid-range forecast in a Reuters poll of 37 economists for orders to remain unchanged on the month.

Orders were boosted by a rebound in demand from the euro zone, with contracts in the single currency bloc up 7.7 percent overall due to a number of large orders.

The data came as a relief to the country after purchasing managers’ surveys earlier this week showed the private sector shrank for the second month running in June, pointing to a possible contraction in second quarter gross domestic product.

“The orders data means that second quarter (growth) is well underpinned on the downside but it won’t be as good as the first quarter,” said Deka Bank’s Andreas Scheuerle.

Germany’s economy grew by 0.5 percent in the first three months of this year and Scheuerle said he expected it to expand by 0.2 percent in the second quarter.

Economists also warned that the rise in orders from the single currency bloc was probably a one-off.

“Of course it’s a good sign after the sharp fall last month but overall we will go through a period of weakness,” said BHF-Bank’s Gerd Hassel.

“The euro zone debt crisis is really making itself felt and is having a massive impact on German economic growth.”

Domestic orders took a knock, falling 1.3 percent month-on-month as they receded from an upwardly revised gain of 0.6 percent in April, putting a dampener on hopes that private consumption will drive growth in Germany this year.

“We are seeing a stabilisation but it doesn’t look that great because domestic orders sunk,” Hassel said.

The disappointing figure for domestic demand came after retail sales unexpectedly dropped in May.

But domestic demand has not entirely collapsed. A GfK survey showed consumer confidence inched up going into July on improving income expectations and German auto sales also rebounded in June, defying weakness in the French, Italian and Spanish car markets.

The ministry said orders from within Germany were solid and added that the overall industrial order situation in Germany remained favourable.

“The conditions for German industry remain good for the moment in an environment characterised by growing uncertainty.”

The data for April was revised upwards to a month-on-month fall of 1.4 percent from a previously reported drop of 1.9 percent. (Reporting by Michelle Martin, Editing by Madeline Chambers and Belinda Goldsmith)

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