German factory orders fell the most in a year in September as Europe’s sovereign debt crisis and slowing economic growth prompted companies to reduce investment.
Orders, adjusted for seasonal swings and inflation, slumped 3.3 percent from August, when they dropped a revised 0.8 percent, the Economy Ministry in Berlin said today. That’s the second straight drop and the biggest since September 2011. Economists forecast a 0.4 percent decline, according to the median of 40 estimates in a Bloomberg News survey. From a year earlier, orders sank 4.7 percent when adjusted for work days.
Germany’s economy, Europe’s largest, is showing signs of weakness as governments and consumers across the region reduce spending, damping export demand. Business confidence fell to the lowest in more than 2 1/2 years in September and the unemployment rate rose from a two-decade low. At the same time, Germany is weathering the debt crisis better than its euro-area counterparts thanks to exports to emerging markets and domestic demand.
Today’s data “are a catastrophe and very bad news,” said Thomas Harjes, senior European economist at Barclays Plc in Frankfurt. “We have a huge problem in the rest of the euro area that now seems to be reaching Germany and its labor market. For the coming quarters, the economic outlook is quite gloomy.”
The euro dropped after the report and traded at $1.2783 at 12:16 p.m. in Frankfurt. European stocks advanced for the third time in four days ahead of the U.S. presidential election. U.S. index futures and Asian shares also rose.
German domestic factory orders fell 1.8 percent from August, today’s report showed. Export orders dropped 4.5 percent, driven by a 9.6 percent plunge in sales to other euro-area countries. Investment-goods orders declined 2.4 percent and consumer-goods orders were down 1.7 percent.
Orders fell 2.3 percent in the third quarter from the second, the ministry said.
While bulk orders were below average in September, “the weak economic environment in the euro area and in the broader global economy is having a bigger impact on demand for German industrial goods,” it said. “Therefore industrial production may weaken further in the months to come.”
The euro region’s debt crisis has already pushed at least five of the bloc’s 17 members into recession, among them Italy and Spain.
Euro-area services and manufacturing output contracted for a ninth month in October, adding to evidence that the economy is in recession. A composite index based on a survey of purchasing managers in both industries dropped to 45.7 from 46.1 in September, London-based Markit Economics said today. A reading below 50 indicates contraction.
U.K. factory output rose 0.1 percent in September from the previous month, less than economists forecast and held back by declines in machinery and chemical production, another report showed today. Total industrial output plunged 1.7 percent as oil and gas output dropped by a record due to maintenance of sites.
German growth slowed to 0.3 percent in the second quarter from 0.5 percent in the first. Third-quarter data are due on Nov. 15.
“The German economy continues to be in robust shape but increasingly feels the inner-European adjustment process and uncertainty stemming from the sovereign debt crisis,” Bundesbank President Jens Weidmann said on Oct. 12. The Frankfurt-based central bank said on Oct. 22 the economy may shrink in the fourth quarter amid weakening global growth.
The International Monetary Fund predicts German’s economy will grow 0.9 percent this year and next, while that of the euro area is forecast to shrink 0.4 percent in 2012 before growing 0.2 percent in 2013. The Washington-based lender projects growth of more than 2 percent in the U.S. this year and next and a 7.2 percent expansion in emerging Asia in 2013.
Daimler AG, the world’s third-biggest maker of luxury vehicles, on Oct. 24 lowered its forecast for 2012 operating profit as declining demand in Europe and tougher competition in China sapped third-quarter earnings.
At the same time, Continental AG, Europe’s second-largest maker of car parts, stuck to 2012 earnings targets as growth in North America and Asia offset weakness in its home region and led to higher third-quarter profit.
Investor confidence gained for a second month in October as the European Central Bank’s new bond-purchase plan fueled speculation that the debt crisis can be contained. Consumer confidence will climb to a five-year high this month, according to market research company GfK.
“Germany’s economy is performing better than most of the others in the euro area, but it won’t generate strong growth in the current quarter,” said Nick Matthews, senior European economist at Nomura International Plc in London. “A contraction is more likely.”