August 6, 2014 / 7:07 AM / 4 years ago

German orders fall at their sharpest rate in almost three years in June

BERLIN (Reuters) - German industrial orders slid in June at their steepest rate since September 2011 as euro zone demand fell and geopolitical risks made firms cautious, suggesting this sector of Europe’s largest economy will have a weak start to the third quarter.

Contracts fell by 3.2 percent on the month as orders from the single currency bloc plunged by 10.4 percent, data from the Economy Ministry showed. That missed the Reuters consensus forecast for a 1.0 percent rise and undershot even the lowest estimate for a 0.5 percent decrease.

“While a stagnation of the German economy in the second quarter seems hard to avoid, the industrial engine is losing some fuel,” said Carsten Brzeski, senior economist at ING.

A breakdown of data showed foreign orders slumped by 4.1 percent, with economists attributing this mainly to weakness in the single currency bloc rather than the Ukraine crisis. German firms also held back, with domestic orders down by 1.9 percent.

“Today’s data shows that downside risks for the German economy do not only come from geopolitical tensions but also from longer-than-expected weak demand from euro zone peers,” Brzeski said.

The Economy Ministry said geopolitical developments and risks probably led to more cautious ordering, adding that growth in the industrial sector would tend to be moderate in the coming months.

Factories producing capital goods took on 6.4 percent fewer bookings in June than in the previous month and consumer goods manufacturers got 0.4 percent fewer contracts.

Orders for intermediate goods were the only bright spot, registering a 1.6 percent rise.

The Economy Ministry said the order level in the second quarter was 0.6 percent below the level of the first quarter, largely due to weaker appetite at home.

While the German economy had its strongest growth in three years in the first quarter, that was largely due to mild weather and it is generally seen slowing or even stagnating in the second quarter before accelerating again in the third.

Data due out on Thursday is expected to show industrial output climbed by 1.3 percent in June.

The orders data for May was revised up to a drop of 1.6 percent from a previous -1.7 percent.

Reporting by Michelle Martin; Editing by Alexandra Hudson

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