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Spring in air for German industry as orders rise

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(GlobalPost/GlobalPost)

German factory orders jumped in February, driven by buoyant domestic and export demand, suggesting that rising confidence in Europe's biggest economy is finally reaching the real economy, analysts said Friday.

Industrial orders jumped by 2.3 percent in February compared with January, making up for the 1.6-percent drop seen the previous month, the economy ministry said in a statement.

Analysts polled by Dow Jones Newswires had been pencilling in a more modest gain of 1.2 percent for February.

"Growth in domestic orders accelerated noticeably by 2.2 percent and orders from overseas offset the previous month's drop with an increase of 2.3 percent," the ministry said.

The upward momentum was fuelled primarily by a sharp increase of 3.5 percent in orders for capital goods. Orders for semi-finished goods rose by 0.9 percent while orders for consumer goods edged up by 0.1 percent.

Using a two-month comparison to iron out short-term fluctuations, the ministry calculated that orders in January and February combined inched 0.1 percent higher compared with the same period a year earlier.

Analysts were encouraged by the unexpected rise in factory orders.

It "adds to today's picture of the German industrial sector turning the corner after the dire end of 2012," said Natixis economist Johannes Gareis.

"Germany's little V-shaped recovery in the first quarter is on track, at least until February," agreed Berenberg Bank economist Christian Schulz.

"The recovery in 'soft' confidence data has reached 'hard' data such as retail sales and industrial orders," he said.

And German resilience "may turn out to be good news for the eurozone crisis countries, as their chances of exporting their way out of trouble improve with higher German demand," the expert said.

ING DiBa economist Carsten Brzeski said the data represented "some rays of sunshine."

The rise was "good news, as it shows that the industrial backbone is not running out of steam, but it is no reason to become overly cheerful," Brzeski said.

UniCredit analyst Andreas Rees saw the data as "the first unambiguous signs of a turnaround in German hard data. It is not only the strong increase in the headline figure per se which is encouraging but especially its (balanced) composition."

The economy ministry noted that the number of bulk or big-ticket orders -- which tend to distort the headline figure -- was slightly below average.

"Furthermore, both domestic and foreign demand rose to nearly the similar extent, thereby putting the German economy on a solid footing," Rees said.

"To be crystal-clear, we think that today's data is not a one-off," he insisted.

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http://www.globalpost.com/dispatch/news/afp/130405/spring-air-german-industry-orders-rise