German Factory Orders Gained in February as Growth Picks Up

German factory orders rose in February, adding to signs that growth in Europe’s largest economy is gathering pace.

Orders, adjusted for seasonal swings and inflation, rose 0.6 percent from the prior month, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 0.2 percent, according to the median of 35 estimates in a Bloomberg News survey. Growth in orders for January was revised lower to 0.1 percent from 1.2 percent.

Germany’s economy probably saw “substantial strengthening” in the first quarter, the Bundesbank said last month, citing a recovery in the euro area and warm winter weather that bolstered construction. Still, sentiment surveys from business confidence indexes to gauges of manufacturing activity have shown that companies face headwinds from slowing growth in China to an escalation of tensions between the European Union and Russia over Crimea.

“The emerging market turbulences and the cold winter in the US may have at least temporarily prevented further growth in export orders,” said Christian Schulz, senior economist at Berenberg Bank in London. “Domestic demand and especially consumption are increasingly taking over the role of exports as growth locomotive. That insulates Germany a bit from troubles abroad and should continue to help the euro crisis countries via increased German imports.”

German Growth

Domestic orders increased 1.2 percent in February from the previous month, while export orders climbed 0.2 percent, today’s report showed. Orders from the euro area surged 5.9 percent, and those from outside the bloc dropped 3.1 percent. Total orders climbed 6.1 percent from a year earlier.

The euro fluctuated after the data and was at $1.3702 at 8:57 a.m. Frankfurt time, down 0.1 percent on the day. The yield on German 2-year government bonds was 5 basis points higher at 0.187 percent.

The German economy grew 0.4 percent in the final three months of 2013. The statistics office will publish first-quarter data on May 15.

Volkswagen AG sees a “moderate” upward trend in the European car market, Chief Executive Officer Martin Winterkorn said this week. New car registrations in Germany rose for a fourth month in March, as Bayerische Motoren Werke AG’s BMW brand posted its best March sales ever.

The European Central Bank kept its benchmark interest rate unchanged at a record-low 0.25 percent yesterday, and President Mario Draghi said it is ready to take all possible tools including large-scale asset purchases to head off the threat of deflation in the euro region.

“The German economy is pretty much on track -- the start of the year might have been even better than the end of 2013,” Thilo Heidrich, an economist at Deutsche Postbank AG in Bonn, said before today’s report. “We see a pretty broad recovery in the euro zone from which Germany, with its large export sector, should profit.”

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