German factory orders fell 3.3% in September from August on seasonally adjusted basis, most since September 2011, surprising economists, who had expected drop of 0.4%; European debt crisis, slow growth causing companies to reduce investment

Cindy Allen

Cindy Allen

Nov 6, 2012 – Bloomberg LP

FRANKFURT, Germany , November 6, 2012 () – German factory orders fell the most in a year in September as Europe’s sovereign debt crisis and slowing economic growth prompted companies to reduce investment.

Orders, adjusted for seasonal swings and inflation, slumped 3.3 percent from August, when they dropped a revised 0.8 percent, the Economy Ministry in Berlin said today. That’s the second straight drop and the biggest since September 2011. Economists forecast a 0.4 percent decline, according to the median of 40 estimates in a Bloomberg News survey. From a year earlier, orders sank 4.7 percent when adjusted for work days.

Germany’s economy, Europe’s largest, is showing signs of weakness as governments and consumers across the region reduce spending, damping export demand. Business confidence fell to the lowest in more than 2 1/2 years in September and the unemployment rate rose from a two-decade low. At the same time, Germany is weathering the debt crisis better than its euro-area counterparts thanks to exports to emerging markets and domestic demand.

“In the short term, the outlook for the German economy is rather gloomy,” said Ralph Solveen, head of economic research at Commerzbank AG in Frankfurt. “Orders have been weak in the past months and that will be reflect in production data before long. But we do see good chances for a revival of the German economy down the road.”


Euro-Area Slump


Domestic factory orders fell 1.8 percent from August, today’s report showed. Export orders dropped 4.5 percent, driven by a 9.6 percent plunge in sales to other euro-area countries. Investment goods orders declined 2.4 percent and consumer goods orders were down 1.7 percent.

Orders fell 2.3 percent in the third quarter from the second, the ministry said.

While bulk orders were below average in September, “the weak economic environment in the euro area and in the broader global economy is having a bigger impact on demand for German industrial goods,” it said. “Therefore industrial production may weaken further in the months to come.”

The euro region’s debt crisis has already pushed at least five of the bloc’s 17 members into recession, among them Italy and Spain. German growth slowed to 0.3 percent in the second quarter from 0.5 percent in the first. Third-quarter data are due on Nov. 15.


‘Adjustment Process’


“The German economy continues to be in robust shape but increasingly feels the inner-European adjustment process and uncertainty stemming from the sovereign debt crisis,” Bundesbank President Jens Weidmann said on Oct. 12. The Frankfurt-based central bank said on Oct. 22 the economy may shrink in the fourth quarter amid weakening global growth.

The International Monetary Fund predicts German’s economy will grow 0.9 percent this year and next, while that of the euro area is forecast to shrink 0.4 percent in 2012 before growing 0.2 percent in 2013. The Washington-based lender projects growth of more than 2 percent in the U.S. this year and next and 7.2 percent expansion in emerging Asia in 2013.

Daimler AG, the world’s third-biggest maker of luxury vehicles, on Oct. 24 lowered its forecast for 2012 operating profit as declining demand in Europe and tougher competition in China sapped third-quarter earnings.

At the same time, Continental AG, Europe’s second-largest maker of car parts, stuck to 2012 earnings targets as growth in North America and Asia offset weakness in its home region and led to higher third-quarter profit.

Investor confidence gained for a second month in October as the European Central Bank’s new bond-purchase plan fueled speculation that the debt crisis can be contained. Consumer confidence will climb to a five-year high this month, according to market research company GfK.

“Germany’s economy is performing better than most of the others in the euro area, but it won’t generate strong growth in the current quarter,” said Nick Matthews, senior European economist at Nomura International Plc in London. “A contraction is more likely.”




--With assistance from Kristian Siedenburg in Vienna. Editors: Matthew Brockett, Zoe Schneeweiss


To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net


To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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