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German Factory Orders Increased Less Than Forecast in February

German factory orders increased less than economists forecast in February as countries outside the euro region barely offset a drop in European demand.

Orders (GRIORTMM), adjusted for seasonal swings and inflation, increased 0.3 percent from January, when they fell a revised 1.8 percent, the Economy Ministry in Berlin said today. Economists forecast a gain of 1.5 percent, according to the median of 35 estimates in a Bloomberg News survey. From a year ago, orders dropped 6.1 percent when adjusted for work days.

Germany’s economy, Europe’s largest, is showing signs of regaining some strength after shrinking in the fourth quarter as unemployment at a two-decade low encourages consumer demand. Business and investor sentiment rose last month after Greece received a second bailout and the European Central Bank pumped more than 1 trillion euros ($1.3 trillion) into the banking system to counter the region’s fiscal crisis.

“A lot has improved in the sovereign debt crisis in terms of confidence,” said Aline Schuiling, an economist at ABN Amro in Amsterdam. “At the same time, the impact of the crisis is still with us and growth in Germany will have been flat in the first quarter.”

Orders from the euro area fell 3.2 percent in February and domestic orders decreased 1.4 percent, today’s report showed. Orders from outside the 17-nation currency bloc jumped 5 percent after a 7.6 percent decline the previous month. The ministry revised January’s drop in overall orders from 2.7 percent.

‘Stable Development’

While domestic orders and those from non-euro states “show a stable development,” the currency region “continues to give negative impulses,” the ministry said. Industrial production remains “burdened,” it said.

The euro-area economy contracted in the fourth quarter as governments in crisis-stricken countries slashed spending in a bid to regain market confidence in the sustainability of their finances. While the euro economy will contract 0.3 percent this year, German gross domestic product may increase 0.6 percent, according to the European Commission.

Adding to signs of stabilization after an economic contraction of 0.2 percent in the fourth quarter, unemployment dropped to 6.7 percent in March from 6.8 percent in the previous month. German business confidence rose to an eight-month high in March and exports increased in January.

German Stocks

German stocks had their best start to a year relative to the U.S. since 2006 as investors bet German companies will benefit most from improving global growth. The DAX index has gained 16.4 percent.

“There’s no reason to assume exports will slump and domestic demand should drive growth,” said Ulrike Rondorf, an economist at Commerzbank AG (CBK) in Frankfurt. Still, “the underlying pace of factory orders is still relatively weak.”

Schaeffler AG, the world’s second-biggest maker of roller bearings, on March 20 forecast slower sales growth and profitability in 2012, partly because of weaker European demand.

“We are currently seeing demand in the European markets weaken,” Chief Executive Officer Juergen Geissinger said in a statement on that day. “Globally, however, our business is continuing to show a positive trend.”

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

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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