German Factory Orders Unexpectedly Fall on Slump in Export Demand: Economy
German factory orders unexpectedly declined in January as foreign demand for investment goods such as machinery slumped.
Orders (GRIORTMM), adjusted for seasonal swings and inflation, fell 2.7 percent from December, when they gained 1.6 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.6 percent increase, according to the median of 37 estimates in a Bloomberg News survey. From a year ago, orders dropped 4.9 percent when adjusted for work days.
“It’s an ugly number but it was caused by a sharp drop in big-ticket items so it masks the overall robustness of the German economy,” said Alexander Koch, an economist at UniCredit Group in Munich. “The confidence indicators signal a gradual recovery.”
The economy, Europe’s largest, contracted in the fourth quarter of 2011 as the sovereign debt crisis curbed demand for its exports across the euro region. Still, business, consumer and investor confidence all jumped last month after Greece clinched a second bailout and the European Central Bank flooded the banking system with a record amount of cash, pushing down yields on government debt and lifting stock markets.
The euro pared gains after today’s report and the yield on German 10-year bunds rose one basis point to 1.79 percent. European stocks advanced, rebounding from yesterday’s biggest drop since November, as investors awaited a private report that may show American payrolls increased. The Stoxx Europe 600 Index (SXXP) was up 0.5 percent at 1 p.m. in Frankfurt.
Orders from outside the 17-nation euro region plunged 8.6 percent in January after surging 12.1 percent in December, the report showed. Euro-area orders slipped 0.4 percent after a 6.5 percent decline in December. Domestic orders increased 0.9 percent in January.
The Economy Ministry said sales of big-ticket items were “strongly below average” in January, with orders for investment goods down 5.5 percent. Consumer goods orders fell 2.9 percent, with those from the euro region plummeting 11 percent.
Belt-tightening across the euro area is damping growth in Germany’s biggest export market. The 17-nation economy will shrink 0.3 percent this year, driven by contractions of 1.3 percent in Italy and 1 percent in Spain, the European Commission said on Feb. 23.
Euro-area services output shrank more than estimated in February, a survey of purchasing managers showed March 5. Spanish industrial production fell for a fifth month in January, dropping 4.2 percent from a year earlier, another report showed today.
Shares in German steelmaker Salzgitter AG (SZG) fell the most in four months on March 5 after it said Europe’s debt crisis will make it “challenging” to match 2011 results. The company still posted a fourfold gain in full-year profit.
The benchmark DAX share index is up 13 percent this year, outperforming its main European counterparts.
Germany’s Bundesbank said on Feb. 20 the outlook for Europe’s largest economy has “improved perceptibly,” even though “risks relating to the sovereign-debt crisis remain.” It forecast in December that economic growth will slow to 0.6 percent this year from 3 percent in 2011 before accelerating to 1.8 percent in 2013.
Diminishing concerns over a euro-region meltdown coupled with rising oil prices may prompt Asia-Pacific central banks to hold off on adding monetary stimulus this week to preserve firepower.
U.S. Labor Market
South Korea and New Zealand will hold interest rates tomorrow, according to all economists surveyed by Bloomberg News. Indonesia will keep its key rate at 5.75 percent the same day after an unexpected cut last month, while Malaysia will stand pat for a fifth meeting a day later, separate surveys indicated.
In the U.S., companies added 215,000 workers in February, after increasing January payrolls by 170,000, ADP Employer Services may say today. The Labor Department may report non-farm productivity slowed less than earlier estimated last quarter, and the Mortgage Bankers Association will release data for loan applications.
The improved global outlook may benefit German companies. Audi AG, the world’s second-largest maker of luxury vehicles, said on March 1 it is targeting 2012 profit “on par” with last year’s record results as higher sales offset increased spending on new models and factories.
“The German industrial sector is still robust, mainly driven by a healthy domestic economy and export diversification,” said Carsten Brzeski, an economist at ING Group in Brussels. “Recession is not on the cards.’
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