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German outlook brightens after jump in factory orders

The outlook for the German economy, Europe's biggest, is looking brighter for the second quarter following a surprise jump in industrial orders, data showed on Thursday.

FRANKFURT: The outlook for the German economy, Europe's biggest, is looking brighter for the second quarter following a surprise jump in industrial orders, data showed on Thursday.

Industrial or factory orders -- a key measure of demand for German-made goods -- were up 3.1 per cent in April compared with the level in March, the statistics office Destatis said in a statement.

That more than made up for a 2.8-per cent drop in orders seen the previous month and analysts had been projecting a more modest rebound of around 1.0 per cent in April.

The economy ministry said that foreign demand was driving growth, with export orders jumping by 5.5 per cent while domestic orders were steady compared with the previous month.

In particular, orders from the eurozone soared by 9.9 per cent.

By sector, orders for semi-finished goods rose by 0.2 per cent and orders for capital goods were up by 4.4 per cent, while orders for consumer goods climbed by 7.1 per cent.

Looking at the three months to April, domestic orders rose, while export orders slipped slightly. Nevertheless, the overall trend remained upwards, the ministry insisted.

"Factory orders got off to a good start in the second quarter, with a good chance of an increase for the whole quarter," the ministry said.

Analysts were also confident that the slowdown in activity seen at the end of the first quarter would be overcome.

"After a disappointing end to a strong first quarter, doubts about the strength of the German recovery had gradually surfaced. Today's data show that at least the industry is alive and kicking," said ING DiBa economist Carsten Brzeski.

BayernLB economist Christiane von Berg agreed.

"This is the first indication that the German economy may be able to match the high pace of growth seen in the first quarter," she said.

"Against the backdrop of the recovery in the euro area as a whole, we expect the upward trend in orders to continue in the coming months."

Berenberg Bank economist Christian Schulz said that "despite short-term uncertainties about the Ukraine crisis, which have dampened spirits according to some surveys, Germany's manufacturing sector is doing well in the hard data."

But he cautioned that while the strong rise in eurozone orders "provides some confirmation of the post-crisis upswing in most countries, the data are very volatile and come after a relatively weak first quarter."

Commerzbank economist Ralph Solveen was also less optimistic, noting that the strength of the April data was attributable to the unusual number of bulk orders.

"Even with the positive surprise in April, this points to slower momentum in German manufacturing and therefore also in the overall economy in the second quarter," he said.

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