July 7 (Bloomberg) -- German manufacturing orders jumped the most in almost two years in May, adding to signs that the deepest economic slump since World War II is abating.

Orders, adjusted for seasonal swings and inflation, rose 4.4 percent from April, the Economy Ministry in Berlin said today. That’s the biggest gain since June 2007 and nine times the 0.5 percent increase forecast by economists in a Bloomberg News survey. Orders were still 29.4 percent lower than a year earlier.

“Thankfully the worst is behind us and we are on track for a gradual recovery,” said Carsten Brzeski, an economist at ING Group in Brussels, who forecast a 4 percent gain. “The summer months will be crucial to see if the global recovery, on which German manufacturing depends, gathers momentum.”

Global economic confidence improved for a third month in June, according to the Bloomberg Professional Global Confidence index. While the government expects the German economy, Europe’s largest, to shrink 6 percent in 2009, Bundesbank President Axel Weber said on June 16 there’s been a “remarkable brightening of the economic situation in recent weeks.”

The euro rose slightly after the report to $1.3999 and European government bonds fell, pushing the yield on the 10-year German bund up three basis points to 3.33 percent.

Exports Increase

The increase in factory orders was driven by an 8.2 percent gain in exports to countries outside the euro region, today’s report showed. Domestic demand increased 3.9 percent. The ministry revised April’s reading for overall orders to an increase of 0.1 percent from unchanged, meaning they rose for a third successive month in May.

The improvements in orders are domestic and export driven and cover all the main industry sectors, the ministry said in the statement. “The expectation for a broader stabilization has been confirmed.”

Governments worldwide have announced about $2 trillion in economic stimulus programs to help revive economic growth. Munich-based Siemens AG said on June 22 this may generate orders of about 15 billion euros ($21 billion) for Europe’s largest engineering company.

Laura Tyson, an adviser to President Barack Obama, said today that the U.S. should consider drafting a second stimulus package, because the $787 billion approved in February was a “bit too small.”

In the U.K., Germany’s third-largest trading partner, factory production unexpectedly fell for the first time in three months, a separate report showed today.

U.K. Warning

British Prime Minister Gordon Brown is warning that policy makers mustn’t become too complacent that the worst of the recession is over. German Chancellor Angela Merkel’s coalition government is spending about 82 billion euros in an attempt to pull the economy out of recession.

At the same time, the European Central Bank has slashed interest rates, flooded financial markets with cash, and yesterday started buying 60 billion euros of covered bonds to free up credit and encourage banks to lend to companies and revive the economy.

“The positive trend in orders signals that the industrial sector is getting back on its feet,” said Nick Kounis, chief European economist at Fortis Bank in Amsterdam. “The German economy will return to modest growth in the second half of the year.”

To contact the reporter on this story: Gabi Thesing in Frankfurt gthesing@bloomberg.net

Last Updated: July 7, 2009 09:00 EDT