German orders beat expectations in June as foreign demand surges

AUG 6, 20152:57 PM

[BERLIN] German industrial orders rose much more than expected in June thanks to strong demand from abroad, suggesting that output from industry in Europe's largest economy is likely to rise in the coming months.

Data from the economy ministry showed contracts for German goods were up by 2.0 per cent on the month. That beat the Reuters consensus forecast for a 0.2 per cent gain and overshot even the highest estimate for a 1.5 per cent increase. "Boom. German industrial orders just defied any concerns about a slowdown of the economy due to the Chinese slowdown or Greek turbulence," said Carsten Brzeski, an economist at ING, adding that the weaker euro was helping.

"Today's numbers show that the German economy could take the current positive momentum into the third quarter," he said.

German gross domestic product (GDP) data is due to be published on Friday. The finance ministry has said the economy probably expanded by around 0.3 per cent in the April-June period - the same rate as in the first quarter - as domestic demand provided key support while foreign trade also picked up.

Orders data bode well for that - the economy ministry said that on average orders were 3.0 per cent higher in the second quarter than in the first.

A breakdown of Thursday's data showed factories received 4.8 per cent more bookings from abroad while domestic orders fell by 2.0 per cent.

Capital goods orders surged while appetite for consumer products and intermediate goods was weaker than in May.

The economy ministry said recent sentiment indicators suggested industry would continue to grow moderately in the coming months. In another positive sign, a survey published this week showed manufacturing activity rose slightly in July as new contracts piled in.

Some recent forward-looking data has provided grounds for optimism, with business morale improving after Greece and its creditors reached an agreement.

Siemens has performed better than expected despite weakness in China as the recovery in Europe helped boost some sales.

But truck maker MAN SE cut its profit and sales expectations for this year because of a plunge in Brazilian demand. Food-processing technology maker GEA's orders dropped by 9 per cent on an organic basis in the second quarter.

The data for May was revised down to a 0.3 per cent decrease in contracts from an originally reported 0.2 per cent drop.

REUTERS