Domestic Demand Spurs Rise in German Factory Orders as Recovery Broadens

German factory orders rose in October as domestic demand picked up, another sign the country’s economic recovery is broadening.

Orders, adjusted for seasonal swings and inflation, increased 1.6 from September, when they fell 4 percent, the Economy Ministry in Berlin said today. Economists expected a 1.9 percent gain, according to the median of 40 estimates in a Bloomberg News survey. From a year earlier, orders climbed 17.9 percent when adjusted for working days.

Europe’s largest economy is benefitting from rising consumption at home as companies step up hiring and investment to meet export orders. The Bundesbank last week raised its 2010 growth forecast to 3.6 percent, which would be the fastest since records for a reunified Germany began in 1992, even as the euro area’s sovereign debt crisis curbs demand in markets such as Greece, Ireland, Portugal and Spain.

“The rebound in orders is consistent with the German industrial sector regaining some momentum in the final months of this year,” said Aline Schuiling, an economist at ABN Amro in Amsterdam. “The sector is not only benefitting from robust foreign demand, but also from accelerating domestic demand.”

The euro was little changed after the report, trading at $1.3359 at 12:13 p.m. in Frankfurt.

Domestic Orders

Domestic orders rose 2.4 percent in October, driven by a 3.9 percent jump in demand for investment goods, the Economy Ministry said. Export orders gained 0.8 percent, driven solely by demand from outside the euro area. Orders from within the currency bloc fell 0.9 percent.

Belt-tightening by governments and consumers across Europe may damp German exports. Ireland last month became the second euro nation after Greece to get a bailout from the European Union and International Monetary Fund, and investors are speculating Portugal could be next.

Even so, German companies including Bayerische Motorenwerke AG and Daimler AG are shortening Christmas breaks at factories to meet surging orders.

Volkswagen AG, Europe’s largest carmaker, said yesterday it may add 50,000 jobs globally by 2015, with around 10 percent of those in Germany. At 7.5 percent, the country’s unemployment rate is the lowest in 18 years.

“With German employment at its highest level since reunification and wages set to increase, all the conditions have been met for private consumption to grow,” said Frederik Ducrozet, an economist at Credit Agricole bank in Paris.

To contact the reporter on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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