Feb. 4 (Bloomberg) -- Factory orders in Germany, Europe's largest economy, probably rose for a third month in four in December as a drop in oil prices from October's record brightened the outlook for global growth, a survey of economists showed.

Orders of goods such as factory machinery and toasters may have risen 1.5 percent from November, when bookings dropped 2.4 percent, the median of 31 forecasts in a Bloomberg survey showed. The Economy and Labor Ministry is scheduled to publish the December report at noon today in Berlin.

``Foreign demand remains the engine of Germany's recovery,'' said Andreas Cors, an economist at the Berlin-based DIW economic institute, one of the top six funded by the German government, in an interview. ``This impetus will spill over to the domestic economy and help improve consumer demand and investments.''

A 16 percent drop in the cost of crude oil from an October record and the euro's 5 percent decline from its December high have eased concern that Germany's export-led expansion may stall. Improving sentiment among executives and consumers suggests that economic growth may spread to other areas of the economy in 2005.

German companies including tire maker Continental AG, Heidelberger Druckmaschinen AG, a maker of printing machines, and Henkel KGaA, which produces consumer goods including soap and shampoo, said this week profit should improve this year.

Germany's $2.6 trillion economy recovered from three years of stagnation in 2004, expanding 1.7 percent, as record exports helped fuel investment. Growth slowed in the second half as rising unemployment and higher oil prices hurt spending and the euro's appreciation sapped exports.

Jobless Burden

Unemployment jumped above 5 million in January for the first time since World War II, the government said Feb. 2. Retail sales fell for the third month in four in December, capping three years of decline in consumer spending and keeping the pace of growth at about half that of the U.S. and the U.K.

The U.S., the world's largest economy and destination of about 10 percent of German exports, grew 4.4 percent in 2004, the most in five years. The economy of China, where German companies including Siemens AG have been selling goods from locomotives to power plants, expanded by 9.5 percent.

``The expansion of the world economy will continue at a speedy pace,'' Eckhardt Wohlers, chief economist at the Hamburg- based HWWA economic institute, another of Germany's top six, said yesterday in a statement e-mailed to news organizations. Growth in world trade will slow to 7.5 percent this year from 10 percent in 2004, Wohlers said.

ECB on Hold

The euro reached $1.3666 on Dec. 30, the highest since the currency's introduction in 1999. It dropped to $1.2964 at 7 p.m. in Frankfurt yesterday, as rising interest rates in the U.S. make some dollar-denominated investments more attractive. The Federal Reserve lifted its main lending rate by a quarter point to 2.5 percent on Feb. 2, the sixth increase in eight months.

The European Central Bank yesterday kept its benchmark lending rate at a six-decade low of 2 percent, extending a freeze since June 2003, as rising unemployment tempers consumer spending and helps keep inflation in check. ECB President Jean-Claude Trichet said ``conditions remain in place for growth to pick up and become more broadly balanced.''

``On the domestic side, the economy will continue to benefit from very favorable financing conditions and higher corporate profits and efficiency,'' Trichet said. ``Spending will rise along with real disposable income.''

Income tax cuts worth 6.5 billion euros ($8.4 billion) this year in Germany, slowing inflation and rising consumer confidence may help bolster spending in coming months. Confidence among shoppers advanced to an eight-month high and business confidence rose to an 11-month high in January as executives became more optimistic about domestic demand.

Inflation in the euro region probably slowed to 2.2 percent in January from 2.4 percent in December, an estimate by the European Union's statistics office may show today, according to the median of a Bloomberg survey of 37 economists. The estimate will be published at 11 a.m. in Brussels.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net.

Last Updated: February 3, 2005 19:05 EST