German Factory Orders Unexpectedly Drop as Risks Weigh

German factory orders unexpectedly fell in March, signaling that growth in Europe’s largest economy remains uneven.

Orders, adjusted for seasonal swings and inflation, fell 2.8 percent from February, when they increased a revised 0.9 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 0.3 percent, according to the median of 37 estimates in a Bloomberg News survey.

The German economy is set for “dynamic, broad-based” growth, the European Commission said in its quarterly forecast, even as the Bundesbank warned that expansion will slow “noticeably” after a very strong first quarter. The country faces headwinds including a low inflation rate, a slowdown in China and rising tension with Russia as it leads the exit of the euro area from its longest-ever recession.

“There are risks that could slow down growth,” said Michael Holstein, an economist at DZ Bank in Frankfurt. “But the major positive factor from abroad is that the euro area is recovering, and the effect for the German industry is bigger than negative influence from China or Russia.”

Domestic orders decreased 0.6 percent in March from the previous month, while export orders declined 4.6 percent, today’s report showed. Orders from the euro area fell 9.4 percent while those from outside the bloc dropped 1.7 percent.

Rate Decision

The European Central Bank on Thursday will keep its benchmark interest rate unchanged at a record-low 0.25 percent, according to 56 of 58 economists surveyed by Bloomberg. President Mario Draghi has said the central bank is ready to use all possible tools, including large-scale asset purchases, to head off the threat of deflation in the euro region.

Volkswagen AG, Europe’s largest automaker, reported a 22 percent gain in first-quarter operating profit on April 29, helped by record sales at its luxury Porsche and Audi brands. At the same time, Adidas AG, the world’s second-biggest sporting-goods maker, reported first-quarter profit that missed analysts’ estimates as sales slid in almost all divisions.

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.

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