German Factory Orders Increase on Demand From Outside Euro Area: Economy

German factory orders rose more than economists forecast in December as demand from outside the euro area helped its largest nation weather the sovereign debt crisis.

Orders, adjusted for seasonal swings and inflation, rose 1.7 percent from November, when they slumped 4.9 percent, the Economy Ministry in Berlin said today. Economists forecast an increase of 1 percent, according to the median of 36 estimates in a Bloomberg News survey.

“It is too early to call this a rebound,” said Carsten Brzeski, senior economist at ING Group in Brussels. “However, there is at least still sufficient demand for goods ‘made in Germany’ to keep the industrial engine running in 2012.”

German business confidence jumped to a five-month high in January, adding to signs that Europe’s largest economy may be coping with the debt crisis and could avoid a deep recession. At the same time, the government and the International Monetary Fund have reduced their 2012 growth forecasts as budget cuts across the 17-nation currency area damp demand for Germany’s goods in its biggest export market.

Orders from euro-region nations fell 6.8 percent in the month, today’s report showed. Domestic orders slipped 1.4 percent. Orders from outside the euro area jumped 12.3 percent, more than compensating for their 10 percent decline in November. Demand for investment goods rose 2.8 percent in December and orders for consumer goods increased 1.9 percent.

Growth in China

The euro was little changed after the report, trading at $1.3055 at 12:30 a.m. in Frankfurt for a decline of 0.8 percent today. European stocks dropped, with the Stoxx Europe 600 Index trimming a six-month high, as Greece struggled to reach a deal with its international creditors to avoid default. U.S. index futures fell, while Asian shares rose.

China’s economic expansion would be cut almost in half if Europe’s debt crisis worsens, a scenario that would warrant “significant” fiscal stimulus from the nation’s government, the IMF said in a report today.

Based on the IMF’s “downside” forecast for the global economy, China’s growth could drop by as much as 4 percentage points from the fund’s current projection, which is for 8.2 percent this year, the organization said in a report released by its China office in Beijing.

In the U.S., the trade deficit probably widened in December to a six-month high as imports climbed faster than exports, economists said a report this week will show.

Fourth-Quarter Contraction

From a year ago, German factory orders were unchanged in December when adjusted for work days. The Economy Ministry said orders fell 1.4 percent in the fourth quarter of last year from the third.

Siemens AG, Germany’s largest engineering company, reported fiscal first-quarter earnings on Jan. 24 that missed analysts’ estimates and warned that its profit targets for this year have become more challenging to reach.

The IMF on Jan. 24 cut its forecast for German growth this year by one percentage point to 0.3 percent, citing a growing threat of recession across the single currency area.

Bundesbank President Jens Weidmann said that view is “too pessimistic.” The Frankfurt-based central bank forecasts 0.6 percent growth for 2012.

Robert Bosch GmbH, the world’s biggest car-parts supplier, said on Jan. 25 that revenue rose 8.8 percent last year, driven by expansion in its home European markets. The Stuttgart-based manufacturer forecasts sales growth of between 3 percent and 5 percent in 2012.

Investor Confidence

European investor confidence rose to a seven-month high in February, the Sentix research institute said today. In December, the European Central Bank lent euro-area banks 489 billion euros for up to three years in an effort to unlock freezing credit markets.

Since then, money-market rates and the yields on Spanish and Italian government debt have fallen, signaling the debt crisis may be easing.

“We’re seeing stabilization on all fronts,” said Jana Meier, an economist at HSBC Trinkaus & Burkhardt AG in Dusseldorf, Germany. “The risk for the German economy is that governments across the euro area implement additional austerity measures.”

To contact the reporter on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net

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