German factory orders slump most since 2009

WARSAW: German factory orders plunged at the steepest pace in eight years as demand for investment goods weakened.

Orders, adjusted for seasonal swings and inflation, fell 7.4% from December, when they increased 5.2%, data from the Economy Ministry in Berlin showed. That’s the biggest drop since January 2009.

The typically volatile reading compares with a median estimate for a 2.5% decline in a Bloomberg survey.

Orders were down 0.8% from a year earlier.

The report breaks a string of data that had pointed to a buildup in momentum and serves as a reminder that Europe’s largest economy isn’t fully insulated against risks.

Last month, the Bundesbank predicted growth would pickup at the start of 2017, supported by domestic demand and a stronger global outlook.

“The data are the result of an unfortunate combination: Bulk orders propelled demand at the end of last year, and now the turbo fired in the other direction,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt.

“In the context of sentiment indicators, there’s no reason for concern. I’m still convinced we’ll see a good quarter.”

The euro was little changed and traded at US$1.0596 at 8:41 am Frankfurt time.

Domestic factory orders fell 10.5% in January from the previous month, led by a 16.8% slump in demand for goods, according to the report. Export orders were down 4.9%. The ministry said demand for big-ticket items was markedly below average.

“The weak start to the year should be manageable,” the ministry said. “Business confidence in manufacturing is significantly brighter than the long-term average, so that a revival in manufacturing can still be expected.”

Ifo’s business climate index improved in February amid strong activity in manufacturing and services, and unemployment continued to decline.

The ministry will publish industrial-production data for January today. — Bloomberg investment