Domestic demand spurs recovery in German factory orders

German industrial orders picked up in February after plummeting the previous month and the Economy Ministry said an upturn in the sector was in the cards, although the rise in contracts for factories in Europe’s largest economy was weaker than expected.

Bookings rose 3.4 percent on the month, Economy Ministry data showed on Thursday. That missed the Reuters consensus forecast for a 4.0 percent increase, but followed an upwardly revised drop of 6.8 percent in January.

The data comes after a survey that showed manufacturing growth reached its highest level in almost six years in March, driven by an increase in orders for intermediate goods, suggesting the sector will contribute to an economic expansion in the first quarter.

“German new orders have woken up from hibernation,” said ING economist Carsten Brzeski, adding that bookings seemed to be extremely sensitive to seasons and the weather. “Looking through this high volatility, the trend for order books is slightly positive, though still not as positive and strong as current confidence indicators are suggesting.”

February’s increase was driven by the strongest surge in domestic demand since May 2011, with companies in Germany ordering 8.1 percent more goods than they ordered in January, when they had significantly scaled back orders.

Foreign orders failed to contribute, with a breakdown showing bookings from the eurozone fell by 2.4 percent while non- eurozone contracts increased by 1.6 percent.

But Sophia Krietenbrink, economist at Germany’s DIHK Chambers of Commerce, said international political risks seem to be having hardly any impact on well- filled German order books.

The German economy faces numerous risks this year – ranging from unpredictable elections at home and in France to protectionist trade policies under US President Donald Trump and the UK’s Brexit negotiations.