German manufacturing orders rose more than expected in August thanks to strong foreign demand, easing concerns about the sustainability of the recovery in Europe's largest economy.
Orders rose by 3.4 per cent on the month, the economy ministry said today, in a shot of positive news for the broader euro zone, where Ireland's banking and budget woes have dominated market attention in recent weeks.
A stronger-than-expected rise in industrial output in Spain added to a more rosy economic picture, though analysts said the Spanish economy's growth prospects remained poor.
The rise in German orders beat all projections that gave a consensus for a 0.8 per cent rise, as big-ticket orders for large transport projects gave demand a boost.
"These numbers are very positive," said WestLB economist Arnd Schaefer. "Nevertheless, there seems to have been a concentration of very large orders in the month and that is what played the decisive role."
"The trend will likely gradually slow down a bit. At the moment the German manufacturing sector is still looking quite strong. We're expecting a slowing of the recovery but no collapse."
The jump suggests the engine of the European economy remains in robust form, contrasting with other recent data that had fuelled expectations of a sharp slowdown after a stellar second quarter.
Last Friday's purchasing managers' survey showed growth in Germany's manufacturing sector cooled in September to its slowest pace since the start of the year, while Monday's equivalent poll for the services sector revealed the slowest expansion in three months.
Today's data showed a 6.6-per cent rise in orders from abroad, with demand for capital goods from the euro zone up 22.6 per cent on the month. By contrast, overall domestic demand fell by 0.5 per cent.
July's fall in orders was revised to a drop of 1.6 per cent from a previously reported 2.2-percent decrease.
"Strong fluctuations in big orders have again had an impact on industry orders," the ministry said in a statement. "But without their inclusion the demand for industrial products remains in an uptrend."
The economy grew by 2.2 per cent in the April-June period - the fastest quarterly expansion in reunified Germany.
Reuters