German factory orders dropped the most in almost three years in November as the euro region economy edged toward a recession and global demand weakened.
Orders (GRIORTMM), adjusted for seasonal swings and inflation, slipped 4.8 percent from October, when they surged a revised 5 percent, the Economy Ministry in Berlin said in a statement today. That’s the biggest drop since January 2009. Economists forecast a decline of 1.8 percent, according to the median of 25 estimates in a Bloomberg News survey (GRIORTMM).
While the euro region’s sovereign debt crisis has clouded the outlook and cooling global growth is hurting export orders, Europe’s biggest economy may still avert a recession. Unemployment at a two-decade low is helping to bolster consumer sentiment, service industries expanded in December and business confidence (GRIFPBUS) unexpectedly rose for a second month.
“It’s quite clear that we’re heading into a pretty sharp downturn even in Germany, which has been one of the strongest of the euro zone’s economies,” said Jennifer McKeown, an economist at Capital Economics Ltd. in London. “Orders are very clearly on a downward trend, as is industrial production itself.”
The euro was little changed after the report, trading at $1.2798 at 12:46 p.m. in Frankfurt. The currency has weakened 4.6 percent against the dollar over the past month. Germany’s DAX benchmark index (DAX) pared its gain after the release.
From a year ago, orders (GEIOYY) fell 4.3 percent in November when adjusted for work days, today’s report showed. The ministry had previously reported a gain of 5.2 percent in October from September.
Orders from euro-region nations fell 4.1 percent from October, when they rose 8.2 percent, today’s report showed. Orders from outside the currency union slumped 10.3 percent, while domestic orders slipped 1.1 percent. Demand for investment goods fell 6.5 percent in the month, while declining 2 percent for consumer goods.
German economic growth will slow this year as demand from its main euro-area trading partners slumps, two economic institutes that advise Chancellor Angela Merkel’s government said last month. The Kiel-based IfW institute said growth will slow to 0.5 percent from 2.9 percent in 2011, while the RWI in Essen sees expansion decelerating to 0.6 percent from 3 percent.
Siemens AG (SIE), Europe’s largest engineering company, forecast stagnant 2012 profits in November. HeidelbergCement AG (HEI) Chief Executive Officer Bernd Scheifele told Rhein-Neckar-Zeitung he expects a “difficult” business environment because of rising energy costs and the sovereign debt crisis.
European economic confidence fell to the lowest in more than two years last month and unemployment (UMRTEMU) remained at a 13-year high in November, two reports showed today. Euro-region retail sales dropped 0.8 percent in November from the previous month, when they rose 0.1 percent, the European Union’s statistics office in Luxembourg said.
The European Central Bank lowered its benchmark rate to 1 percent last month, matching a record low. Euro-region inflation slowed for the first time in five months in December, to 2.8 percent, giving the ECB room to lower borrowing costs further. ECB council members will hold their next rate meeting on Jan. 12 in Frankfurt.
Some German companies may benefit from export demand outside Europe. Porsche SE (PAH3) anticipates U.S. sales to rise to more than 30,000 cars next year on demand for the revamped 911 sports car. Daimler AG (DAI) wants to produce a record 988,110 Mercedes-Benz brand cars and sport utility vehicles in Germany in 2012, Automotive News Europe reported Jan. 1, citing internal company documents.
Still, the labor union-affiliated IMK economic institute said Jan. 3 that Germany’s economy will shrink 0.1 percent this year. Austerity measures by euro-area governments are weighing on demand, making a recession in the 17-nation bloc “unavoidable,” the Dusseldorf-based institute said.
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