 "Shipping terminals and containers are pictured in the harbour of the northern German of Bremerhaven on the banks of the river Elbe. Photo: Reuters")
Strong demand from euro zone countries and domestic customers drove a bigger-than-expected rise in German industrial orders in August, suggesting factories will contribute to growth in Europe's economic powerhouse in coming months.
The surprisingly strong data, published by the Economy Ministry on Thursday, gave some relief after a batch of weak data in July had raised concern that the German economy could be heading towards a sharp slowdown in the second half.
"Finally good news from industrial orders," VP Bank analyst Thomas Gitzel said, adding that continued strong demand from euro zone countries signalled a broader recovery in the bloc.
In a further positive sign for Germany's economic outlook, the BDI industry association raised its forecast for GDP growth this year to 1.9 per cent from previously 1.7 per cent.
"The German economy is proceeding on its growth path," BDI head said. He called on the government to increase investment in schools, roads and digital infrastructure to lay a sound foundation for future growth.
Contracts for goods 'Made in Germany' were up by 1.0 per cent on the month, the data showed. That was the highest reading since March and far better than a Reuters consensus forecast for a rise of only 0.2 per cent.
Domestic demand rose by 2.6 per cent while foreign orders inched down by 0.2 per cent. However, demand from euro zone countries rose by 4.1 per cent, nearly offsetting a drop of 2.8 per cent of contracts from outside the common currency bloc.
The data for July was slightly revised up to a rise of 0.3 per cent from a previously reported increase of 0.2 per cent.
"Industrial orders have been weak so far this year, but they recently picked up slightly," the ministry said, adding that Ifo's business sentiment survey and Markit's purchasing manager survey both signalled an improvement.
"Overall, the latest data point to a light upturn in the industrial sector over the rest of the year," the ministry added.
After having grown by 0.7 per cent in the first quarter and 0.4 per cent in the second, the Germany economy is widely expected to lose some steam in the second half, hampered by sluggish demand from Asia and the United States.
Still, leading economic institutes last week raised their 2016 growth forecast to 1.9 per cent, which would be the strongest rate in five years, mainly driven by soaring private consumption and higher state spending on migrants.
The government will update its own growth forecasts for 2016 and 2017 on Friday. It predicts a 1.7 per cent expansion this year and 1.5 per cent next year.
"While some people threw in the towel regarding German growth in the second half of the year, the wind has turned now," Gitzel said. "Perhaps the recently improved forecasts for German growth are still a bit too conservative."
Others struck a more cautious tone. "One swallow does not make a summer," Commerzbank economist Ralph Solveen said on the rise in industrial orders in August, adding that the overall trend in the sector remained rather negative.
