German October Factory Orders Rebound After Three-Month Drop

  • Demand rises 1.8% on month vs. estimate for 1.2% increase
  • Record-low unemployment is spurring consumption, investment

German factory orders rose for the first time in four months, climbing more than economists anticipated, as demand for investment and consumer goods jumped amid an economic recovery in the country and the 19-nation euro region.

Orders, adjusted for seasonal swings and inflation, rose 1.8 percent in October after a revised 0.7 percent drop in September, data from the Economy Ministry in Berlin showed on Friday. The increase follows three consecutive monthly declines and compares with an estimate for an expansion of 1.2 percent. Orders fell 1.4 percent from a year earlier.

Record-low unemployment, a solid wage outlook and increased immigration is driving private consumption in Europe’s biggest economy that is expected to lead to above-potential mid-term growth, the Bundesbank said in its latest monthly report. The euro-area recovery is benefiting from unprecedented stimulus by the European Central Bank, which cut its deposit rate on Thursday and increased the size of its asset-purchase program.

“After a rough patch for manufacturing orders in the third quarter, the latest data signal a timid recovery,” Germany’s Economy Ministry said in a statement. “Especially demand from the euro area is picking up markedly, suggesting a continued recovery in our European partner countries.”

Consumer-goods orders from the currency bloc jumped 9.2 percent in October, according to the report. Domestic investment-goods demand rose 4.2 percent from the previous month. The ministry said bulk orders were below average in October.

Separately, the Bundesbank kept its growth forecasts for 2015 and 2016 unchanged at 1.7 percent and 1.8 percent, respectively, and sees an economic expansion of 1.7 percent in 2017. It cut its inflation projections for this year and next and predicted consumer prices will rise an average of 2 percent in 2017.

“The German economy is currently growing primarily on the back of lively domestic demand,” the Bundesbank said in a report. “With export markets outside the euro area expected to rebound and economic growth within the euro area gaining a little more traction, the healthy underlying state of the German economy should stand out even more clearly over the next two years.”

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