German Factory Orders Rebound in Sign Economic Growth Picking Up

Employees Work on Motorbikes at a Factory in Berlin
Employees secure back wheels to BMW R 1200 GS motorbikes on the assembly line at the Bayerische Motoren Werke AG (BMW) factory in Berlin. Photographer: Krisztian Bocsi/Bloomberg

German factory orders rebounded in January in a sign that the pace of recovery in Europe’s largest economy is accelerating.

Orders, adjusted for seasonal swings and inflation, rose 1.2 percent from December, when they fell a revised 0.2 percent, the Economy Ministry in Berlin said today. Economists forecast a gain of 0.9 percent, according to the median of 36 estimates in a Bloomberg News survey. Orders surged 8.4 percent from a year ago when adjusted for the number of working days.

The German economy grew more than economists expected in the three months through December, helping drive a faster-than-forecast expansion in the euro area. The pick-up in the region may give the European Central Bank reason to hold off from more monetary easing when policy makers meet in Frankfurt today.

“The outlook is pretty good as we have more investment and consumption in Germany,” said Stefan Muetze, an economist at Helaba in Frankfurt. “We’ll also have better exports in 2014. The euro area is no longer a risk; it was one for the last two years but we now have a better situation.”

Domestic demand rose 1.6 percent in January from the previous month, while export orders increased 1 percent, today’s report showed. Orders from outside the euro area surged 7.2 percent. Those from within the bloc dropped 8.8 percent after climbing 6.9 percent in the prior month.

Good Start

Factory orders “started the new year well,” the ministry said in the report. “The stronger momentum is basically driven by foreign demand, both inside and outside the euro area. Domestic demand is also developing positively, albeit more moderately.”

Germany’s economic growth of 0.4 percent last quarter was mostly driven by exports and investment while domestic demand and private consumption declined. Business confidence in the nation is at the highest in 2 1/2 years.

BASF SE, the world’s largest chemical company, posted fourth-quarter profit that beat analyst estimates on Feb. 25. Europipe, a unit of Salzgitter AG, Germany’s second-largest steelmaker, signed a contract on Jan. 29 to supply more than 600 kilometers (372 miles) of steel pipes for the construction of the South Stream Offshore Pipeline in eastern Europe.

The ECB will announce its interest-rate decision at 1:45 p.m. local time today and President Mario Draghi will hold a press conference 45 minutes later. Policy makers will keep the benchmark rate unchanged at a record-low 0.25 percent, according to a Bloomberg survey.

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