7 September 2009, 17:03  German industrial orders +3.8%m/m

Germany’s manufacturing rebound has beaten expectations again, with industrial orders rising by a larger-than-expected 3.5 per cent in July. The latest monthly rise, extending a 3.8 per cent increase in June, confirms the strength of the recovery under way in Europe’s largest economy, and points to robust growth in overall economic activity in the third quarter. However, the fast pace of contraction at the end of last year and the start of 2009 is far from being reversed. Manufacturing orders in July were still almost 20 per cent lower than a year before. Germany has been among the first of the world’s largest nations to come out of recession – but it was also one of the countries worst affected by the collapse in global confidence after the failure of Lehman Brothers, the investment bank, last year.
German industrial orders in July were driven higher by a 10.3 per cent surge in domestic orders, with domestic orders of investment goods particularly strong. That suggested the recovery might have moved beyond the restocking of inventories by companies and have started to encourage a revival of spending on plant and equipment. In contrast, orders from overseas, which had risen strongly in June, fell by 2.3 per cent in July. The recent strength of industrial orders has encouraged hope that the country’s manufacturing sector will soon be able to take over as an engine of growth from the country’s “cash-for-clunkers” incentive scheme for car purchases, which helped lift consumer spending in the first half of this year. However, rising unemployment is expected to act as a drag on growth and weaknesses in the German financial system could prevent banks providing the credit needed to oil the wheels of the recovery.

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