--Feb Result: -0.2% m/m (pan); -0.6% m/m (west); +4.6% m/m (east)
--Forecast median: +0.5% m/m (pan)
--Forecast range: -0.9% to +2.1% m/m (pan)
--Jan Result: -3.0% m/m (pan) (unrevised from latest BBK figures)
-2.9% m/m (west)
-5.8% m/m (east)
--
FRANKFURT (MktNews) - German manufacturing orders in February came in at the weak end of expectations, falling for the second consecutive month, due largely to weaker domestic and foreign demand for capital goods.
The February data are preliminary and likely to be revised. However, they underpin the impression of a continued slowdown in the German manufacturing sector.
Nevertheless, German manufacturing orders have not collapsed. February orders still stood 4.0% above the year earlier level.
Both foreign and domestic orders declined equally in February (-0.3% m/m), both for the second month in a row.
Orders for German capital goods posted the biggest decline in February, down 1.2% m/m, with both domestic (-1.1%) and foreign demand showing (-1.5%) large drops.
The decline in domestic orders for capital goods suggests a somewhat cooler investment climate in Germany. The fall in foreign orders confirm that this sector is one of the most direct channels through which the German economy is affected by the U.S. slowdown.
On the other hand, orders for German consumer durable and non-durable goods rose 0.7% in February, due entirely to stronger domestic demand (+1.3%), while foreign demand fell marginally (-0.1%). The much stronger domestic demand may be the first sign of the much-hoped-for rise in consumer spending this year due to income tax cuts.
The consumer goods orders rise may cheer to some extent those who are still relatively optimistic for the German economic outlook this year. However, it remains unclear whether this increase will be sustained to a sufficient extent to avoid a significant slowdown.
Basic goods orders rose marginal in February (+0.2% m/m) due to stronger foreign demand (+0.9%), while domestic orders fell marginally (-0.1%). This may be explained by the fact that foreign producers started to adjust their inventories earlier than other sectors and so now may have to stock up to maintain daily production.
And the rise in basic good orders was due completely to an extraordinary 42.1% increase in foreign orders in east Germany, while west German foreign orders fell 1.3%. The east German jump gives the impression of being a few bulk orders and so could be a one-off factor. If that is true, the figures are weaker than they appear.
Today's figure will do little to resolve a possible conflict in the European Central Bank' (ECB) governing council concerning a possible rate cut on April 11th. Supporters of a rate cut will argue that there are clear signs for a continued slowdown in growth, and so inflation, while opponents may say that the slowdown is not very pronounced yet and that there are signs that consumer demand will compensate in part of the losses in other sectors.