By Clifford Coonan
BERLIN, Feb 7 - German industrial orders rose by 5.0 percent month-on-month in December, data showed on Thursday, fuelling hopes of economic recovery and relieving some pressure on Chancellor Gerhard Schroeder in election year.
The increase followed a 0.6 percent rise in November. A poll of 14 economists had predicted a consensus month-on-month rise of 0.1 percent, with the range between -1.0 percent and +1.5 percent.
Schroeder's centre-left government, behind in polls ahead of an election in September, will be encouraged by the orders data, particularly after figures on Wednesday showed unemployment mounted the politically sensitive four-million mark in January.
As it is seeking to kick-start a persistently sluggish domestic economy, a rise in domestic orders will be particularly welcome. They were up 5.6 percent after a decline of 0.6 percent in November. Foreign orders rose 4.5 percent.
"These are surprisingly strong numbers and both foreign and domestic orders were unexpectedly strong. One has to view the numbers with caution, but all in all, it looks as if we've turned the corner," said Rainer Guntermann at Dresdner Kleinwort Wasserstein.
Germany relies strongly on its exports, which include electronics goods and its famous cars, but domestic demand has proved stubbornly difficult to stimulate.
The government has insisted that a progamme of tax reform, which started in January 2001 and goes further this year, will eventually feed through into an upturn in domestic demand.
The chancellor will also be boosted by an 8.3 percent increase in orders in depressed eastern Germany, where Wednesday's data showed unemployment approaching 20 percent.
While only five of Germany's 16 states are in the former communist region, they are expected to prove key in deciding who holds the balance of power after an election on September 22, due to the high number of swing voters in the area.
TOO EARLY TO TALK OF TURNAROUND
Analysts remained cautiously optimistic, but Stefan Bielmeier at Deutsche Bank in Frankfurt said it was too early to talk of a turnaround in Europe's biggest economy.
"It's especially good news that domestic orders rose more than foreign orders. But this does not necessarily mean a trend change for domestic demand," Bielmeier said.
Commerzbank's Christoph Hausen noted that orders data were notoriously volatile and the figure could be revised in January.
"Nevertheless, the data fits in with the positive picture we have been getting from other indicators such as PMI (purchasing managers indices) and Ifo (survey of German business sentiment), which point to an improvement in 2002," he said.
"But we expect that we won't see any significant growth in GDP until the second quarter," said Hausen.
Dresdner Kleinwort Wasserstein's Guntermann said there were still no clues as to how strong the recovery will be.
"Also, past experience shows Germany lags the U.S. by six months, and as the U.S. is not yet on a stable footing, this puts a question mark over the outlook here," Guntermann said.
The rise also reflects an increase in orders late last year and in January registered by some of Germany's top
companies. Releasing its fiscal 2002 first quarter figures in January, electronics giant Siemens AG said it had seen strong increases in orders in long-cycle businesses, including transportation systems, power transmission and distribution and power generation.
German electronic component maker Epcos AG, the world's number two passive electronic components maker, said that it saw a 31 percent rise in new orders in the first quarter of fiscal 2002, which runs to the end of December 2001. At the same time, however, Epcos, in which Siemens and Japan's Matsushita hold 12.5 percent each, said sales were still hit by price erosion and the sustained market slump in Europe.
Condom manufacturer Condomi AG
won an order in January to supply 66 million condoms to Kenya and Pakistan.
Condomi said it had orders for 77.3 million condoms and it planned to increase its production capacity in Erfurt to 720 million condoms in 2002/2003 from 220 million now.
Sensor manufacturer paragon AG, which is based in Delbrueck in North Rhine-Westphalia, said that it was expecting its order books to fatten up this year as the recovery takes hold.
"The order book for the current financial year has already reached 30 million euros, so that sales growth of considerably over 40 percent is expected for 2002," the group said.
Industrial production data for December is due on Friday.