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German Factory Orders Rise Most in Eight Months as Recovery Seen - (Bloomberg)

Posted by Chris Advincula on Aug 6, 2013 6:56:00 AM

German factory orders (GRIORTMM) increased by the most in eight months in June, led by demand for investment goods and adding to evidence that Europe’s biggest economy is benefiting from a nascent euro-area recovery.

Orders, adjusted for seasonal swings and inflation, increased 3.8 percent from May, when they fell a revised 0.5 percent that was less than originally estimated, the Economy Ministry in Berlin said today. Economists forecast a gain of 1 percent in June, according to the median of 42 estimates in a Bloomberg News survey. Orders advanced 4.3 percent from a year ago, when adjusted for the number of working days.

European Central Bank President Mario Draghi said last week that a “tentative” stabilization in the euro area is underway after at least six quarters of contraction, as improving business confidence feeds through to the real economy. Stronger European demand may boost Germany’s export-focused manufacturers by countering a slowdown in Asia.

“The worst could be behind us, and even though credit and demand is weak, a pick-up seems to be taking shape” in the euro region, said Aline Schuiling, an economist at ABN Amro Bank NV in Amsterdam. “The German manufacturing sector should be the first to profit from a recovery in the euro area, and demand from there is still more important than that from Asia.”

Paris Air Show

Domestic factory orders climbed 3.3 percent from May and overseas demand rose 4.2 percent, today’s report showed. Basic-goods and consumer-goods orders both dropped 0.2 percent.

Orders for investment goods climbed 6.8 percent from May, led by a 20.2 percent gain in orders from within the euro zone. The increase for the single-currency bloc was the largest since June 2007 and partly reflects contracts signed at the Paris Air Show held last month, the ministry said.

Pan-European planemaker Airbus SAS, a unit of European Aeronautic, Defence & Space Co., received orders for 466 planes worth $69 billion at the Paris Air Show in June this year. Based on the number of orders and deliveries, Airbus’s first-quarter book-to-bill ratio on narrow-body jets was the highest since September 2011, according to data compiled by Bloomberg.

“A rebound in factory orders reflects a recovery in demand for airplanes and ships,” said Ulrike Rondorf, an economist at Commerzbank AG in Frankfurt. “For the second half of the year, an increase in demand for investment goods would be decisive, since it would be a sign that entrepreneurs have put the crisis behind them.”

Manufacturing in the 17-nation euro area expanded last month for the first time in two years and services output shrank at a slower pace, according to a survey of purchasing managers by London-based Markit Economics.

Bundesbank Outlook

Hugo Boss AG (BOSS) reported second-quarter earnings on July 31 that beat estimates after the German luxury-clothing maker opened more stores and tightened inventory handling to protect pricing. Sales in Europe climbed 14 percent, beating a 7 percent increase in Asia.

European countries accounted for 69 percent of German exports last year, while 16 percent of shipments went to Asia, according to the Federal Statistics Office in Wiesbaden. China’s economy, the world’s second-biggest, has slowed for the past two quarters.

While the Bundesbank said last month that the German economy expanded “strongly” in the second quarter, it also warned of signs of a slowdown. The Frankfurt-based central bank in June cut its 2013 growth outlook to 0.3 percent from 0.4 percent.

Continental AG (CON), Europe’s second-largest car-parts maker, on Aug. 1 scaled back its sales forecast for this year, saying the region’s tire market isn’t recovering as expected. Continental now expects revenue to increase 4 percent, down from an earlier prediction of 5 percent.

The euro-area economy probably stagnated in the three months ended June, according to economists surveyed by Bloomberg last month. The European Union’s statistics office in Luxembourg reports gross domestic product on Aug. 14. 


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