Factory orders in Germany, Europe’s largest economy, fell more than economists forecast in July, led by a drop in export demand as the global economy cooled.
Orders, adjusted for seasonal swings and inflation, dropped 2.8 per cent from June, when they rose 1.8 per cent, the economy ministry in Berlin said in a statement today. The decline, the first in four months, exceeded economists’ forecast of 1.5 per cent, according to the median of 37 estimates in a Bloomberg News survey. On the year, orders rose 8.7 per cent, when adjusted for work days.
German business confidence fell to the lowest in more than a year in August and the benchmark DAX Index has shed 25 per cent over the past three months as a global slowdown and Europe’s worsening debt crisis clouded growth prospects. While a recovery came to a near halt in the second quarter, export growth quickened from the previous three months and unemployment fell in August for a 26th straight month.
“Even before the financial market turbulence, the global economy was showing signs of cooling,” said Heinrich Bayer, an economist at Deutsche Postbank in Bonn, Germany.
“While the trend in the economy is still pointed upwards, we could see something of a pause until the end of the year.”
Factory orders from abroad dropped 7.4 per cent in July, today’s report showed. Domestic orders rose 3.6 per cent.
Orders of investment goods fell seven per cent from June, when they increased 5.1 per cent, with foreign demand slumping 12.8 per cent. Domestic investment-goods orders rose 3.6 per cent. Demand for intermediate goods increased 2.9 per cent and orders of consumer goods gained 4.5 per cent.
“In a change from previous months the amount of bulk orders was merely average,” the ministry said in the statement. “The factory orders dynamic has weakened in recent months, although the trend remains pointed upward.”
Audi AG is hiring staff to increase car production, including a 57 per cent capacity boost for the ¤69,600 ($98,900) A8 flagship sedan on expectations that the luxury auto industry will weather the stock market slump. Bayerische Motoren Werke AG (BMW) and Daimler AG are adding shifts, shortening breaks and building new factories to meet demand.
At the same time, ThyssenKrupp AG, Germany’s biggest steel maker, on August 12 posted fiscal third-quarter earnings that missed analyst estimates as European demand weakened. Siemens AG, BASF AG and Volkswagen AG, three of Germany’s largest companies, reported second-quarter earnings that missed analyst estimates.
Adding to signs of slowdown, euro area industrial orders unexpectedly fell in June and economic confidence slumped last month as consumers grew more pessimistic about the outlook.
In Germany, investor confidence dropped more than economists forecast to the lowest in more than two and a half years in August.
The Bundesbank forecasts the German economy will expand about three per cent this year as rising domestic demand helps compensate for a moderation in export orders. Retail sales unexpectedly held steady in July after surging the most in more than three years the previous month.
“We are going to be seeing a somewhat slower pace of growth,” said Jens Kramer, an economist at Norddeutsche Landesbank in Hanover, Germany. “What allows us to sleep a bit better is that domestic demand is still looking very healthy.”
