German Manufacturing Orders Increase More Than Forecast:

German factory orders rose more than twice as much as economists forecast in February, adding to signs that Europe’s largest economy returned to growth in the first quarter.

Orders, adjusted for seasonal swings and inflation, increased 2.3 percent from January, when they dropped a revised 1.6 percent, the Economy Ministry in Berlin said today. Economists forecast a 1.1 percent gain, according to the median of 33 estimates in a Bloomberg News survey. In the year, workday-adjusted orders were unchanged.

While the euro area remains mired in recession, the German economy probably found its way back to growth in the first quarter after a 0.6 percent contraction in the last three months of 2012. Retail sales unexpectedly rose in February and the jobless rate remained close to a two-decade low. At the same time, business confidence dropped for the first time in five months in March amid renewed concerns about Europe’s sovereign debt crisis.

Today’s data “provide further evidence of the strength of German domestic demand,” said Christian Schulz, an economist at Berenberg Bank in London. “However, the latest setbacks in sentiment caused by Italy and Cyprus may delay the return to strong growth by a few months.”

The euro rose a quarter of a cent after the report before dropping back to $1.2919 at 1:20 p.m. in Frankfurt, down 0.1 percent today. Europe’s benchmark Stoxx 600 index fell 1.5 percent to 287.27.

Investment Goods

In Asia, Japanese shares jumped to a 4 1/2-year high, the yen dropped and bond yields fell to a record low after the central bank expanded bond purchases. Increased stimulus from central banks may bolster a global economy forecast by the World Bank in January to expand 2.4 percent this year.

Export orders in Germany climbed 2.3 percent in February, with those from the euro area gaining 1.6 percent, today’s report shows. Domestic sales rose 2.2 percent. Orders for investment goods increased 3.5 percent.

“With orders picking up, the weak phase in industrial production appears more and more to be dissipating,” the ministry said. “The main driver of this positive development is increased orders at producers of investment goods.”

Elsewhere in Europe, U.K. house prices rose 0.2 percent in March from February, according to Halifax, which said values may continue on a “modest” upward trend this year.

Euro Area

Euro-area retail sales fell 0.3 percent in February as a drop in France offset gains in Germany and Spain, The European Union’s statistics office in Luxembourg said today.

In the U.S., non-farm payrolls probably increased in March and the jobless rate held at a four-year low of 7.7 percent as demand improved at the start of the year, according to Bloomberg surveys of economists. The Labor Department will release the figures at 8:30 a.m. in Washington.

While there are signs of recovery in Germany, the sovereign debt crisis in the 17-nation euro area is also taking its toll.

Germany exports about 40 percent of its products to the euro-area economy, which the European Central Bank predicts will shrink 0.5 percent this year before growing 1 percent in 2014.

“Weak economic activity has extended into the early part of the year and a gradual recovery is projected for the second half of this year, subject to downside risks,” ECB President Mario Draghi said yesterday after the Frankfurt-based central bank held its benchmark interest rate at a record low of 0.75 percent.

German ‘Decoupling’

Siemens AG (SIE), Europe’s biggest engineering company, is preparing to eliminate as many as 1,400 jobs at its energy and infrastructure businesses to bolster profitability, according to two people familiar with the matter.

Some German companies are compensating for weaker demand in Europe with shipments to faster-growing regions.

Daimler AG (DAI)’s truck division plans to increase vehicle sales, profit and market share this year on its expansion in emerging markets and demand in Brazil, Andreas Renschler, head of the carmaker’s truck unit, said on March 13.

“The German economy benefits from the gradual recovery of the global economy,” said Carsten Brzeski, senior economist at ING Group in Brussels. “In this context, today’s new order data add to the evidence that the German economy’s decoupling from the rest of the euro area is continuing.”

To contact the reporter on this story: Stefan Riecher in Frankfurt at sriecher@bloomberg.net

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

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