German Factory Orders Fell Amid Uncertain Outlook

By Alessandro Speciale

German factory orders (GRIORTMM) fell for the first time in three months in November, reflecting a slow recovery of confidence in Europe’s largest economy.
Orders, adjusted for seasonal swings and inflation, slid 2.4 percent after a revised increase of 2.9 percent in October, data from the Economy Ministry in Berlin showed today. Economists predicted a decline of 0.8 percent, according to the median of 24 estimates in a Bloomberg News survey. Orders fell 0.4 percent from a year earlier.
Germany narrowly avoided a recession in the middle of 2014, and the Bundesbank said last month that the economy managed only a “modest start” to the fourth quarter. While surveys have shown German economic sentiment is improving, the euro area as a whole is struggling with sluggish growth, falling prices and Greek political instability.
“Though a downward surprise compared to our
expectations in November, factory-orders growth continued to stabilize compared to earlier months,” said Evelyn Herrmann, European economist at BNP Paribas SA in London. That “should support a moderate pickup in manufacturing growth at the beginning of 2015 following the weakness since last summer,” she said.
The euro dropped after the report and traded at $1.1811 at 8:43 a.m. Frankfurt time.

Order Trend

With confidence rising, prospects for a gain in orders in the fourth quarter are “overall good,” the Economy Ministry said.
In November, domestic factory orders slumped 4.7 percent from the previous month, and export orders fell 0.7 percent, the ministry said in the statement, adding that bulk orders were “markedly below average.” Orders for investment goods dropped 3.1 percent and those for basic goods slid 2.3 percent, while demand for consumer goods was up 2.6 percent, it said.
The European Central Bank is preparing a stimulus package that is likely to include government-bond purchases for discussion at its Jan. 22 monetary-policy meeting. Data yesterday showed consumer prices in the currency bloc dropped 0.2 percent in December from a year ago, the first decline since 2009, after a slump in oil costs.
German inflation slowed to 0.1 percent last month, also the weakest in more than five years. Even so, the nation’s unemployment rate dropped to a record-low 6.5 percent.
Niestetal, Germany-based SMA Solar Technology AG cut its sales forecast last month, citing an accelerated decline in European distribution and project delays in the U.K.
“Renewed concerns about other euro-zone members including Greece could near-term retard the rebound in business confidence and investment somewhat,” Holger Schmieding, chief economist at Berenberg Bank in London, said before the report. “But the contagion risks should be containable.”