German industrial orders stable in April

By AFP

July 15, 2010 Updated Jun 8, 2009 at 11:01 AM CDT

German industrial orders, a key indicator in Europe's biggest economy, were stable in April compared with the previous month, the economy ministry said on Monday.

Orders had risen strongly in March, their first rise in six months, and the ministry said the latest reading, a change of exactly zero percent, showed a "noticeable improvement in the medium-term perspective" for German industries.

The March figure was revised slightly higher moreover to a gain of 3.7 percent from a previous estimate of 3.3 percent.

Analysts were divided on what the steady result meant, but most saw the glass as half-full as Germany struggles to pull out of its worst post-war slump.

"The unchanged orders reading can definitely be rated as positive news for the industrial sector," said UniCredit economist Alexander Koch.

The ministry also noted that orders calculated over two months to smooth out exceptional influences had risen for the first time since December 2007.

They gained 2.0 percent in March and April compared with January and February.

A 12-month comparison was less rosy however, with the March-April figure a full 32 percent lower than in the same period one year earlier.

"Given the strong previous drops in demand, industrial production will still face stiff tests in the near term," the ministry warned.

The country's export-driven economy has been slammed by the global economic downturn, and the government has forecast a 6.0 percent contraction in gross domestic product (GDP) this year.

Commerzbank economist Ralph Solveen looked askance at the industrial orders data on Monday, saying: "The key driver of these rather disappointing numbers was a marked decline in capital goods orders."

Capital goods are used to produce finished products, such as consumer goods.

"The stagnation of orders argues against a broadbased and swift recovery of industrial production," which we expect to have fallen by 1.5 percent in April," Solveen added.

German industrial output figures are due on Tuesday.

"This would suggest that GDP for the second quarter will again turn out negative, though much less so than in the first three months of the year," when it collapsed by a bigger-than-expected 3.8 percent.

Postbank analyst Thilo Heidrich felt however that "the figure of the day is another sign of German industrial stabilisation."

Koch noted further that because "companies have cut inventories drastically recently, even a modest pick-up in global demand should be enough to bring the German industrial dynamic into positive territory in the coming months."

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