German Aug. Factory Orders Growth Tops Expectations On Foreign Demand

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German factory orders grew more than expected on recovering foreign demand in August.

According to the Federal Ministry of Economics and Technology's report, released on Wednesday, factory orders increased 1.4% in August from the previous month, while only a 1.1% rise was expected. Thus, orders increased for the sixth month in a row. But, the monthly growth rate slowed from a revised 3.1% in July. The ministry expects industrial production to increase in the third quarter.

Reversing a monthly fall of 2.4% in July, foreign orders grew 4.6% in August. In contrast, domestic orders slipped 1.9%, following a sharp 9.5% rise in the previous month.

Growth in orders for intermediate goods slowed to 2.8% in August from 4.8% in July and that for capital goods eased to 1.2%. On the other hand, orders for consumer goods dipped 3.8%, larger than July's 0.8% fall.

Year-on-year, orders dropped at a pace of 20.4% in August compared to a 20.1% fall in July. The consensus forecast was for a 19.9% decline. The two-month comparison that smooths out fluctuations showed orders rising 5.8% in July to August from May to June.

Commerzbank analyst Ralph Solveen expects a slight weaker level for September industrial orders. However, the trend in industry is still pointing upwards. Orders are increasing considerably and an upward movement is gaining breadth, he said.

As such, the analyst sees strong economic growth in the second half of the year. He said the recovery is gaining breadth at the moment. Solveen expects a sharp rise of 0.8% in the third quarter GDP and the uptrend in industrial orders points towards robust expansion in the fourth quarter also.

The ministry is slated to release industrial production data for August on October 8. Industrial output is forecast to show a monthly growth of 1.8% in August compared to a 0.9% fall in July. Annual decline in production is seen at 17% for August.

A survey report released last week also supported the current assessment of improving trend in the German manufacturing sector. The Markit/BME manufacturing Purchasing Managers' Index rose to 49.6 in September, which was the highest for thirteen months. Still, the reading stays below the neutral 50 mark.

German factory orders grew more than expected on recovering foreign demand in August. (Market News Provided by RTTNews)