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Industrial orders jump 5.2 percent

German industrial orders surged by a surprise 5.2 percent in November from the level in October, provisional data showed on Thursday, a sign Europe's largest economy should remain robust in coming months.

Industrial orders jump 5.2 percent
Photo: DPA

The performance reinforced the importance of Germany’s export-orientated industry within the EU and eurozone economies.

Analysts polled by Dow Jones Newswires had forecast a monthly increase of

1.0 percent following a rise of 1.6 percent in October, but the figures also revealed a continued and worrying slump in orders from other eurozone members.

A breakdown of the Economy Ministry data indicated that most of the demand came from abroad, with an increase of 8.2 percent, while domestic orders gained a more modest 1.5 percent.

Large orders from abroad for investment goods such as machine tools showed a rise of 9.1 percent as expanding activity in Asia and the Middle East boosted demand for German goods.

The Economy Ministry welcomed the result and took pains to underscore that the result was not only the result of large orders.

“The industrial sector is beginning the year with a good order book,” a statement said.

ING senior economist Carsten Brzeski noted that “German companies had already piled up enough backlogs to keep production running smoothly throughout 2011 and the continuing inflow of new orders could even create production bottlenecks in the coming months.”

But demand from eurozone partners declined by 1.4 percent, which could suggest the now 17-nation bloc is headed for a two or three-speed recovery.

Core countries such as France and Germany appear set for solid growth this year while others could stagnate or even slip back as austerity measures take effect and consumption is curtailed.

On a sliding two-month basis, eurozone orders fell by 8.5 percent in October and November compared with August and September.

The German central bank has forecast growth of 2.0 percent in 2011, with unemployment expected to decline further and business investment tipped to profit from ultra low interest rates.

In Brussels meanwhile, a key European Union indicator showed that confidence in the entire crisis-hit eurozone rose in December, pulled by strong readings in France and Germany.

AFP/mry

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

READ ALSO:

With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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