/www.bloomberg.com/ By Rainer Buergin
Berlin, Nov. 10 (Bloomberg) -- German factory orders probably declined in November for the second time in three months, adding to signs Europe's largest economy may have contracted in the final quarter of last year.
Orders to factories, whose production accounts for about a fifth of the economy, fell 0.6 percent from October, according to the median forecast of 17 economists surveyed by Bloomberg News. The Economy and Labor Ministry will publish the report between 11 a.m. and noon Berlin time today.
``Demand in Germany is weak, executives are pessimistic and hesitate to invest'' in new machinery and equipment, said Dieter Wermuth, an economist at UFJ Bank Ltd. in Frankfurt and a former member of the government's panel of economic advisers, or ``Five Wise Men.'' ``Things would be worse if it hadn't been for the lower exchange rate of the euro last year.''
German business confidence fell to an 11-month low and unemployment rose to a 4 1/2-year high last month. That raises the risk of a second recession in two years. All the country's six leading economic institutes have pared their growth forecasts for this year to about 1 percent or less.
Adam Opel AG, General Motors Corp.'s German unit, is scaling back production capacity by 15 percent in an attempt to return to profit. Mercedes and Smart sales probably won't grow this year, Juergen Hubbert, head of the two DaimlerChrysler AG divisions, said at the Detroit car show.
Unemployment Rose
Economics and Labor Minister Wolfgang Clement yesterday said growth this year may be as little as 0.6 percent.
The number of job seekers rose 28,000 to 4.2 million, adjusted for seasonal swings, a government report showed. That's hurting retail sales, which declined 3.2 percent in November from October, the most in more than three years.
Consumer confidence probably fell to the lowest in eight years in January, on concern about unemployment, tax increases and a possible U.S.-led attack on Iraq, the GfK market research company said earlier this month.
Germany's DAX Index was the world's worst performer last year among 73 indexes that Bloomberg tracks, after posting the biggest annual drop since 1948. Its 44 percent slide compares with a 24 percent drop in the FTSE 100 Index and a 17 percent decline in the Dow Jones Industrial Average.
`Grim Outlook'
Chancellor Gerhard Schroeder's tax increases may limit German economic growth to less than 1 percent this year, the head of his ``Five Wise Men'' panel of economic advisers said in an interview. ``It's a fairly grim outlook -- the first three quarters seem almost lost,'' Wolfgang Wiegard said.
The government on Jan. 1 increased taxes on gasoline by 3 euro cents (3 U.S. cents) a liter and on electricity by 0.25 cents per kilowatt-hour, and raised pension contributions paid by companies and employees. Other steps included raising the rate of value-added tax on certain goods to the full 16 percent and cutting tax breaks for homeowners.
Manufacturers are looking to the U.S., where President George W. Bush's $670 billion tax cut proposals may help spur imports if approved by Congress. The number of workers filing jobless benefit claims fell below 400,000 for the second time in the past three weeks, suggesting consumer demand may pick up.
Germany sells about a 10th of its exports to the world's largest economy, which probably expanded at a 1.5 percent annual pace from October to December, according to a Bloomberg News survey last month. Growth will up to a 2.5 percent pace this quarter, the survey showed.