--- by Simon Sturdee ----
FRANKFURT (AFX) - Strong May German manufacturing orders data released today surpassed all expectations but does not signal a turnaround in the German economy, and distortions could mean it is no more than a statistical blip, economists said.
Manufacturing orders rose a seasonally adjusted 4.4 pct in May from April, boosted by a 9.0 rise in foreign orders, compared to market consensus of a rise of 0.4 pct. The German economics ministry said the increase represented the first rise in manufacturing orders after four months of consecutive falls.
However, as the ministry said, orders were boosted by an "above average" number of foreign orders, and economists are concerned that the rise may be more due to a statistical blip than the start of a genuine turnaround.
The data "looks great but the rise may be due to big ticket items," Deutsche Bank economist Ottmar Lang said.
"Big orders from abroad have really distorted the figures upwards," Ulrike Carstens at HSBC Trinkhaus said.
Economists said that even if the probable distortion on the data is not that pronounced, all other signs are that the German economy is on a downward slide, with no growth expected in the second quarter, followed by only a small amount in the third.
"All the other indicators show the economy is going downwards," HSBC's Carstens said.
The numbers "must be seen in the context of the weak numbers of the month before (when orders fell by 1.9 pct)," BHF Bank economist Peter Meister said.
Economists noted German unemployment figures released this morning show that a recession is still on the cards, they are more of a lagging indicator than manufacturing orders.
"We still see recessionary tendencies in Germany," HSBC's Carstens said.
Moreover, unemployment is now expected to average 3.8 mln in 2001 and 3.7 mln in 2002 -- above the German government's target of 3.5 mln -- and this is "another negative signal for private consumption," BHF Bank's Meister said.
Economists still steer clear of predicting a recession as traditionally defined, and expect a recovery at the end of the year or the beginning of the next.
"It would be too pessimistic to speak of a recession," Commerzbank economist Christoph Hausen said.
Recession is "more a threat than a reality," Deutsche Bank's Lang said.
"We will see an improvement in the business climate as early as the Q3. From August or September onwards it should level out," BHF Bank's Meister said.
"The oil price rise has burdened private consumption and this will fall away in the second half," helped by a recovery in the US, Commerzbank's Hausen said.