German industry orders post biggest rise in more than two years

German industrial orders rose in October at their fastest pace for more than two years, suggesting that the industrial sector will prop up growth in Europe’s largest economy in the coming months.

According to data released on Tuesday by the German ministry for economic affairs, factories saw demand climb 4.9 per cent on the month despite lower than usual bulk orders. That was the biggest increase since July 2014 and far above the Reuters consensus forecast for a 0.6 per cent rise.

"The reading was very strong even without large-scale orders, and that suggests it's more than just a flash in the pan," BayernLB economist Stefan Kipar said, noting that some firms might have brought orders forward. "I don't think we can keep this pace up until the end of the year."

Nonetheless, the data revives hopes of an industrial upturn in the fourth quarter engineering orders fell in October by 10 per cent from the previous year and manufacturing growth slowed slightly in November.

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A breakdown of Tuesday’s figures show that domestic demand climbed 6.3 per cent and foreign orders 3.9 per cent, despite a stagnation in contracts from the euro zone.

A 7.2 per cent surge in capital goods contracts drove the overall increase, while factories making consumer and intermediate goods benefitted from stronger demand. Orders for cars and car parts surged.

In the less volatile two-month comparison, bookings increased 2.5 per cent.

Business climate

The data points to a good start to the fourth quarter, said the ministry, which expected the industrial sector to revive in the October-December period thanks to rising demand and an improved business climate.

German quarterly growth halved to 0.2 per cent in the third quarter as exports weakened, but the economy is expected to perform better in the fourth quarter. The government expects domestic demand to propel growth of 1.8 per cent in 2016.

The latest forward-looking indicators also bode well, showing the mood among investors and consumers picking up. Business sentiment has held steady at a high level, despite greater uncertainty due to Donald Trump’s victory in the US presidential election.

The orders data for September was revised to a fall of 0.3 per cent from a previously reported drop of 0.6 per cent.

Reuters