German Factory Orders Continue To Rise In July

Germany factory order continued to grow in July for the fifth consecutive month, although at a slower pace, boosted by an increase in domestic demand, an official report showed Monday.

The Federal Ministry of Economics and Technology said factory orders climbed a seasonally adjusted 3.5% month-on-month in July, faster than the 2% forecast by economists, but slower than a revised 3.8% growth seen in June. A rise in the new orders in the third quarter is also likely to result in industrial output growth, the ministry said.

The new orders increased mainly due to rise in domestic orders, which grew 10.3%, partly offset by a 2.3% drop in orders from abroad.

Year-on-year, orders continued to fall in July, by 19.8%, much slower than a 25.2% drop in the preceding month. Economists expected a 20.4% fall. Domestic orders fell 24.8%, while orders from abroad dropped 25.6%. New orders have been falling continuously since May 2008.

Orders from the Eurozone were down 29.8% on an annual basis, while orders from the non-Eurozone countries dropped 21.5%.

A gain in new orders usually raises hope that manufacturing sector is improving. In August, the purchasing managers' index, a barometer to measure performance of the manufacturing sector, rose to its highest level in almost 12 months.

The German economy exited recession in the second quarter, growing for the first time after four consecutive quarters of declines. The gross domestic product climbed 0.3% sequentially, following a 3.5% contraction in the preceding quarter. Despite the positive reading for the second quarter, the German Chancellor Angela Merkel said the the national output could contract by between 5% to 6% this year.

Earlier this month, the OECD said in a report that the global recovery is likely to arrive earlier than expected. However, it expects the pace of activity to remain weak throughout next year. The Paris-based organization expects the German economy to contract 4.8% this year based on its latest estimates, upwardly revised from 6.1% drop estimated earlier.

Commerzbank analyst Simon Junker said the increase in new orders is due mainly to large-scale orders for miscellaneous vehicles. Citing the data, the analyst pointed out that the mood of uncertainty triggered by the shocks of late 2008 is fading and the backlog of demand is now gradually being released. According to Junker, the German economy should achieve strong growth in the second half of the year.

Germany's factory orders continued to grow in July for the fifth consecutive month, although at a slower pace, boosted by an increase in domestic demand, an official report showed Monday. (Market News Provided by RTTNews)