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Europe Industrial Orders Unexpectedly Rise on Capital Goods

Employees assemble Daimler AG Mercedes-Benz V6 diesel engines on the production line at the company's factory in Berlin. Photographer: Michele Tantussi/Bloomberg
Employees assemble Daimler AG Mercedes-Benz V6 diesel engines on the production line at the company's factory in Berlin. Photographer: Michele Tantussi/Bloomberg

Feb. 23 (Bloomberg) -- European industrial orders unexpectedly rose in December as surging demand for capital goods such as factory machinery helped offset a slump in Germany.

Orders in the euro area increased 2.1 percent from November, when they gained a revised 2.2 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast a drop of 1 percent, the median of 16 estimates in a Bloomberg News survey showed. From a year earlier, December orders jumped 19 percent.

The euro-region economy may gather strength as booming Asian demand prompts companies to step up output and hiring. German business confidence rose to a record in February and growth in Europe’s manufacturing and service industries accelerated. Daimler AG, the world’s second-largest maker of luxury cars, on Feb. 16 forecast higher full-year earnings.

“Global demand and manufacturers are driving euro-region growth,” said Christoph Weil, a senior economist at Commerzbank AG in Frankfurt. “There’s still a catching-up potential and we’re still far from capacity limits. Growth probably accelerated in the first quarter, followed by moderate expansion” afterward.

The euro was little changed against the dollar after the data, trading at $1.3708 at 10:02 a.m. in London, up 0.4 percent on the day.

Construction Output

The euro-region economy expanded less than economists forecast in the fourth quarter as French growth stalled and unusually cold temperatures sparked a slump in German construction output. Germany, Europe’s largest economy, had the coldest December since 1969, according to the country’s weather service.

Industrial orders in Germany dropped 2.9 percent in December from the previous month, when they rose 5.2 percent, today’s report showed. French orders jumped 7.5 percent in that period and Italy reported a gain of 9.1 percent. In Ireland, Greece and Spain, which are struggling to lower budget deficits, orders declined in December, the statistics office said.

Companies may have to rely on faster-growing economies to bolster sales as euro-area nations toughen austerity measures and cut spending. The International Monetary Fund last month forecast the euro-region economy will expand 1.5 percent this year, with China seen growing 9.6 percent and India 8.4 percent.

Capital Goods

Euro-area orders for capital goods jumped 3.7 percent in December from the previous month, when they rose 2 percent, today’s report showed. Orders for durable consumer goods dropped 2.3 percent from November and those for intermediate goods advanced 2.4 percent. Orders excluding heavy transport equipment such as ships and trains rose 1.3 percent.

The statistics office had previously reported an overall gain in November orders of 2.1 percent. In the European Union, orders jumped 2.5 percent in December from the previous month, when they rose 1.7 percent, today’s report showed. Estonia joined the region this year.

Daimler, based in Stuttgart, Germany, said on Feb. 16 that operating profit this year will “significantly” exceed the 2010 level on record deliveries for Mercedes-Benz vehicles. PSA Peugeot Citroen, Europe’s second-largest carmaker, said earlier this month it plans to expand into India to boost earnings.

European economic confidence probably rose in February, according to a Bloomberg survey. The European Commission in Brussels will release the report tomorrow. A gauge measuring consumer optimism increased more than economists forecast this month.

“The euro area is currently in a process of recovering economic activity, which has gained momentum and recently surprised to the upside,” European Central Bank Executive Board member Juergen Stark said at an event in Frankfurt on Feb. 21. Its strong momentum is in part driven by robust growth abroad. But it also reflects improved domestic growth dynamics.”

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net

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

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