German Factory Orders Unexpectedly Fall on Euro-Area Weak
German factory orders unexpectedly fell in January as the sovereign debt crisis curbed demand in the euro area.
Orders, adjusted for seasonal swings and inflation, decreased 1.9 from December, when they rose a revised 1.1 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.6 percent gain, according to the median of 41 estimates in a Bloomberg News survey. In the year, workday- adjusted orders dropped 2.5 percent.
The Bundesbank expects the German economy to rebound in the current quarter after contracting 0.6 percent in the final three months of 2012. Confidence among entrepreneurs and investors jumped in February and retail sales rose the most in more than six years in January. At the same time, the euro area, Germany’s largest export market, is in a recession and the European Central Bank predicts only a gradual recovery later this year.
“There is still uncertainty with regards to the sovereign debt crisis in Europe,” said Alexander Krueger, chief economist at Bankhaus Lampe KG in Dusseldorf. “But especially in Germany there’s an optimistic vibe and I’m sure this will help the economy return to growth.”
Factory orders from the euro area slumped 4.1 percent in January, driving a 3 percent decline in export demand, today’s report shows. Domestic sales dropped 0.6 percent. Orders for intermediate, investment and consumer goods all fell. December orders were revised up from an initially reported 0.8 percent increase.
The number of bulk orders in January was significantly below average, the ministry said. Still, “the drop in orders at the beginning of this year signals that the manufacturing industry hasn’t overcome its weak phase yet,” it said.
Germany exports about 40 percent of its products to the euro area.
The 17-nation euro economy will shrink 0.3 percent this year, according to the ECB’s December forecasts. It will update its projections today when policy makers gather in Frankfurt for their monthly meeting.
“Although the first signs of economic stabilization are emerging, we expect at least the first half of the year will remain very challenging,” Deutsche Post AG (DPW) Chief Executive Officer Frank Appel said on March 5. “We do expect an improvement in the second half of the year.”
Some German companies are compensating for weaker demand in Europe with shipments to faster-growing regions.
Henkel AG (HEN3), the German maker of Loctite glues and Persil detergent, said yesterday it expects higher profitability and sales to rise as much as 5 percent this year as gains in emerging markets help reduce the company’s reliance on Europe.
“A lot points to a strong rebound after the slump in the fourth quarter,” said Ulrike Rondorf, an economist at Commerzbank AG in Frankfurt. “There’s a good chance Germany will lead the euro-area economy back to growth this year.”
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