German factory orders unexpectedly dropped in September, led by a slump in euro-area demand for investment goods, after big-ticket contracts inflated the previous month’s increase.
Orders, adjusted for seasonal swings and inflation, fell 4 percent from August, when they rose 3.5 percent, the Economy Ministry in Berlin said today. Economists had forecast a 0.4 percent gain, according to the median of 37 estimates in a Bloomberg news survey. From a year earlier, orders climbed 14 percent, when adjusted for working days.
Demand for German manufactured goods may wane as the global economic recovery stutters and the stronger euro hurts price competitiveness outside the 16-nation currency bloc. The Bundesbank expects growth to slow to about 0.5 percent in the third and fourth quarters after surging exports helped the economy expand 2.2 percent in the second, the fastest pace in two decades.
“German companies have still got their hands full working off increasing backlogs,” said Carsten Brzeski, a senior economist at ING Groep NV in Brussels. “Industrial production will remain an important growth driver. However, today’s drop in new orders shows the speed of the industrial recovery is normalizing.”
Export orders dropped 6.6 percent from August, with sales to euro-area countries plunging 13.3 percent, today’s report showed. Domestic orders fell 0.6 percent. Demand for investment goods declined 4.5 percent, driven by a 20.4 percent slump in euro-area orders. Orders for consumer goods rose 0.3 percent.
‘Still Pointing Up’
“As expected, the upward-dynamic in manufacturing orders has weakened after the boom in the first half,” the Economy Ministry said in a statement. “But the trend is still pointing upward, even when adjusted for big-ticket orders.”
Alexander Koch, an economist at UniCredit in Munich, said order volume has been “distorted by vehicle and aircraft demand” in recent months. “We won’t be able to maintain the speed of the second quarter, but in the coming months there will still be solid order growth,” he said.
The government last month raised its estimate for economic growth this year to 3.4 percent from 1.4 percent.
Germany’s SGL Carbon SE, the world’s biggest maker of carbon and graphite products, yesterday increased its forecast for the year after third-quarter profit more than doubled.
The same day, Beiersdorf AG, the German maker of Nivea skin creams, cut its full-year margin forecast as third-quarter profit missed estimates because of falling volumes in Europe.
Euro-area governments are cutting spending, damping demand in Germany’s biggest export market, as investors grow increasingly concerned about budget deficits in Ireland, Portugal and Greece.
In China, economic expansion cooled in the three months through September, and in the U.S. the Federal Reserve is buying an additional $600 billion of Treasuries to bolster its ailing economy. That’s helped the euro advance 19 percent against the dollar since early June.
A “persistently strong” euro is hurting manufacturers’ price competitiveness, Thomas Lindner, president of Germany’s VDMA machine makers’ association, said this week.