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German Factory Orders Rose in July as Domestic Demand Rebounded

Sept. 6 (Bloomberg) -- German factory orders increased in July as domestic demand for investment goods such as machines helped offset a decline in sales to fellow euro-area countries.

Orders, adjusted for seasonal swings and inflation, gained 0.5 percent from June, when they fell a revised 1.6 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.3 percent increase, according to the median of 38 estimates in a Bloomberg News survey. From a year earlier, orders dropped 4.5 percent when adjusted for work days.

Domestic spending is helping Germany’s economy, Europe’s largest, to weather a sovereign debt crisis that’s pushed at least five euro-area nations into recession. Still, business confidence fell for a fourth month in August as companies, which have tapped faster-growing Asian markets to offset declining demand in Europe, begin to feel the effects of weaker global trade.

“An increase in orders would merely be a payback for the previous month and not a trend reversal,” Christian Melzer, an economist at Dekabank in Frankfurt, said before today’s data were published. “Germany is beginning to feel the economic slump in the periphery and weaker global growth. But we’re not forecasting a German recession. We’ll see a stronger slowdown and nothing worse than stagnation.”

‘Stable’ Development

Domestic orders rose 1 percent from June, when they fell 1.8 percent, today’s report showed. Orders from the euro area dropped 0.6 percent after a 3.9 percent decrease in June. Demand from non-euro nations rose 0.5 percent in that period.

Orders for intermediate goods rose 0.5 percent from June, when they fell 3 percent. Orders for investment goods were also up 0.5 percent after a 0.8 percent drop in June. Orders for consumer goods slipped 1.2 percent in July.

The ministry said orders continue to show a “stable” development and demand from the euro region “seems to have stabilized.” There were very few bulk orders in July, it said.

Bayerische Motoren Werke AG, the world’s biggest maker of luxury cars, last month reported its first drop in quarterly profit in almost three years and warned that Europe’s debt crisis could cast further clouds on the global growth outlook.

MAN SE, the German truckmaker that lowered its 2012 earnings forecast in July, said on Aug. 31 it may cut production shifts and eliminate additional temporary staff after already announcing plans to cut half of its non-permanent workforce.

German Unemployment

German unemployment edged higher for a fifth month in August, even as the jobless rate held at a two-decade low of 6.8 percent. Manufacturing contracted last month and exports dropped in June.

The Bundesbank, which in June predicted German growth of 1 percent this year, said on Aug. 20 that uncertainty in the euro area “could have a more negative impact on economic activity in Germany in the second half of the year.” At the same time, the outlook for private consumption remains “favorable,” the Bundesbank said.

European Central Bank President Mario Draghi, who is expected to present details today of a bond-purchase plan designed to ensure the survival of the euro, will also unveil new economic forecasts for the 17-nation euro area, Germany’s largest export market.

To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net

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

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