Germany’s Factory Orders Unexpectedly Rebounded in May: Economy

German May Factory Orders Unexpectedly Rose on Euro-Area Demand
German business sentiment fell to the lowest in more than two years in June and manufacturing is contracting at the fastest pace in three years. Photographer: Guenter Schiffmann/Bloomberg

German factory orders unexpectedly rebounded in May, suggesting Europe’s largest economy maintained some growth momentum into the second quarter.

Orders, adjusted for seasonal swings and inflation, rose 0.6 percent from April, when they declined a revised 1.4 percent, the Economy Ministry in Berlin said today. Economists forecast orders would hold steady in May, according to the median of 36 estimates in a Bloomberg News survey. From a year earlier, orders fell 5.4 percent when adjusted for work days.

German exports and record-low unemployment have helped insulate the economy from the euro area’s debt crisis and fueled an expansion of 0.5 percent in the first quarter. Still, with at least seven euro nations in recession and governments struggling to contain the turmoil, German business confidence fell in June. The European Central Bank may cut interest rates today in an effort to stimulate growth and lending.

“So far, the German economy was clearly outperforming its euro-zone neighbors, giving the impression that it’s nearly immune to the stress elsewhere,” said Evelyn Herrmann, an economist at BNP Paribas SA in London. “Given the recent development in orders, production is likely to stabilize only slowly over the next months.”

The euro was little changed after the release, trading at $1.2506 at 1:08 p.m. in Frankfurt, down 0.2 percent on the day. Germany’s benchmark DAX Index advanced 0.8 percent.

‘Stronger Impulses’

Orders from the euro region jumped 7.7 percent in May after dropping 1.3 percent in April, today’s report showed. Domestic orders fell 1.3 percent in the month and demand from non euro-region nations slipped 0.8 percent.

“Industrial orders continue to point upward,” the ministry said in the statement. “With some big swings due to orders of big-ticket items in some months, the slightly stronger impulses come from abroad. There’s also a solid order dynamic at home.”

German industrial production probably rose 0.2 percent in May from the previous month, when it fell 2.2 percent, according to a Bloomberg survey. The ministry will release the report tomorrow at noon.

Rising wages and unemployment at a two-decade low have helped support domestic demand. The Bundesbank last month raised its 2012 growth forecast to 1 percent from 0.6 percent, citing domestic consumption. That compares with a European Commission forecast for a 0.3 percent economic contraction in the euro area as a whole.


The ECB will probably lower the benchmark interest rate by 25 basis points to 0.75 percent, matching a fresh record, when council members meet in Frankfurt, according to a Bloomberg survey. The central bank will announce its decision at 1:30 p.m.

Since the central bank’s last rate decision, euro-area economic confidence has slumped to the lowest in more than 2 1/2 years in June, services and manufacturing output contracted for a fifth month and unemployment rose to a record in May.

“The foundations for an ECB rate cut at today’s meeting look to be firmly in place,” said Michael Derks, chief strategist at FXPro Financial Services Ltd. in London. “The recent run of data since the last meeting, both within the euro zone and beyond, has strengthened the case for lower rates, with the global economy looking less assured.”

China, U.S.

In China, some parts of the economy may have slowed further in June, based on preliminary results of analyst surveys by Bloomberg. Growth in exports may have fallen to 10.5 percent in June from a year earlier compared with 15.3 percent in May, while expansion in retail sales weakened by 0.3 percentage point to 13.5 percent, median estimates show.

U.S. service industries probably grew in June at a slower pace, a sign the world’s largest economy is struggling to maintain momentum, a Bloomberg survey shows. The Institute for Supply Management’s index of non-manufacturing businesses, covering about 90 percent of the economy, fell to 53 from 53.7 in May, the survey showed ahead of a report later today.

Still, the Bank of Japan today raised its economic evaluation of all regions for the first time in more than two years, citing improvements in consumer spending and rebuilding demand from last year’s earthquake. Governor Masaaki Shirakawa said the economy is starting to pick up, pledging to pursue appropriate policy. It will review its forecasts for growth and inflation for the 2012 and 2013 fiscal years at the policy meeting next week.

Global Uncertainty

With the global economy showing some signs of slowdown, exporters may struggle to maintain their sales growth. Infineon Technologies AG, Europe’s second-largest semiconductor maker, said last month that revenue declined in the three months through June amid global economic uncertainty. Bayerische Motoren Werke AG’s head of sales and marketing in Germany, Karsten Engel, said on May 31 that Germany’s car market won’t grow in 2012 as the crisis curbs spending.

“Sentiment in the German economy has deteriorated massively,” said Rainer Sartoris, an economist at HSBC Trinkaus & Burkhardt AG in Dusseldorf. “German exporters are suffering as the economies of Spain and Italy plummet and the global economy loses momentum.”

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