German Manufacturing Orders Rose More Than Forecast in February

German factory orders rose more than twice as much as economists forecast in February, adding to signs that Europe’s largest economy returned to growth in the first quarter.

Orders, adjusted for seasonal swings and inflation, increased 2.3 percent from January, when they dropped a revised 1.6 percent, the Economy Ministry in Berlin said today. Economists forecast a 1.1 percent gain, according to the median of 33 estimates in a Bloomberg News survey. In the year, workday-adjusted orders were unchanged.

While the euro area remains mired in recession, the German economy probably found its way back to growth in the first quarter after a 0.6 percent contraction in the last three months of 2012. Retail sales unexpectedly rose in February and the jobless rate remained close to a two-decade low. At the same time, business confidence dropped for the first time in five months in March amid renewed concerns about Europe’s sovereign debt crisis.

“Recent indicators are quite conflicting,” said Heinrich Bayer, an economist at Deutsche Postbank AG in Bonn. “The German economy probably recovered in the first quarter but there is still a lot of uncertainty. We’ll have to wait and see if the recovery is sustainable over a longer period of time.”

Export orders climbed 2.3 percent in February, with those from the euro area gaining 1.6 percent, today’s report shows. Domestic sales rose 2.2 percent. Orders for investment goods increased 3.5 percent.

Investment Goods

“With orders picking up, the weak phase in industrial production appears more and more to be dissipating,” the ministry said. “The main driver of this positive development is increased orders at producers of investment goods.”

While there are signs of recovery in Germany, the sovereign debt crisis in the 17-nation euro area is also taking its toll.

Germany exports about 40 percent of its products to the euro-area economy, which the European Central Bank predicts will shrink 0.5 percent this year before growing 1 percent in 2014.

“Weak economic activity has extended into the early part of the year and a gradual recovery is projected for the second half of this year, subject to downside risks,” ECB President Mario Draghi said yesterday after the Frankfurt-based central bank held its benchmark interest rate at a record low of 0.75 percent.

Second Quarter

Siemens AG, Europe’s biggest engineering company, is preparing to eliminate as many as 1,400 jobs at its energy and infrastructure businesses to bolster profitability, according to two people familiar with the matter.

Some German companies are compensating for weaker demand in Europe with shipments to faster-growing regions.

Daimler AG’s truck division plans to increase vehicle sales, profit and market share this year on its expansion in emerging markets and demand in Brazil, Andreas Renschler, head of the carmaker’s truck unit, said on March 13.

“The German economy is still quite strong but signs that Germany is being dragged into the weakness from southern Europe have increased,” said Anatoli Annenkov, senior economist at Societe Generale in London. “We are heading for a weaker second quarter with very low growth rates.”

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