German Manufacturing Orders Jumped Greater-Than-Expected 5.1% in August
By Hellmuth Tromm
German Orders Surge to 10-Year High in August (Update1)
(Adds comment in 4th paragraph, market reaction in 5th.)
Berlin, Oct. 6 (Bloomberg) -- German manufacturers in August
reported the biggest rise in orders in almost a decade,
heightening expectations of a rise in euro zone interest rates as
the region's biggest economy picks up steam.
Orders rose 5.1 percent in August, the Finance Ministry
said, the fifth monthly increase and the biggest gain since
December 1989. The increase also exceeded by a wide margin the
0.4 percent rise analysts had forecast. The report said that
figures were boosted by some big-ticket orders from abroad.
From truckmaker MAN AG to machine tool maker Linde AG,
German manufacturers have seen sales rising in recent weeks,
helped by rising demand from abroad, a boost which is now
increasingly trickling through to the domestic economy. Today's
report shows a 12 percent surge in production of machine tools,
one of Germany's biggest exports and evidence that a stronger
worldwide expansion is taking root, helping European economic
growth back on track.
''The German locomotive is powering ahead,'' said Christian
Schmidt,'' economist at DG Bank AG. ''The European Central Bank
will raise rates earlier rather than later.'' Schmidt said he
expects the ECB to raise rates at one of the next three meetings.
The euro extended gains against the dollar after the report,
climbing as high as $1.0774 from $1.0730 in earlier trading. The
yield on the 10-year German bond, Europe's benchmark, was up 5
basis points at 5.20 percent, keeping earlier losses.
Economists expect Europe's largest economy to accelerate
well into next year and expand as much as 3 percent, twice the
rate the government predicts for this year.
The Finance Ministry said foreign orders rose 8.1 percent in
August from July while domestic orders increased 3.3 percent in
the month. A breakdown showed the monthly gain in orders was led
by a 12.3 percent increase in orders for capital goods such as
machine tools -- evidence the world economy is picking up steam
because German producers lead the world in such products.
Rate Rise
''The ECB is focusing on the fact that growth is picking
up,'' said Stefan Rieke, economist at BHF-Bank AG in Frankfurt.
''I think it's quite probable they will raise rates this
Thursday, but certainly this year.''
Consumer and durable goods orders rose 3.9 percent while
basic goods orders rose 0.7 percent.
''The recent development was favored by special factors,
such as an unusually high number of big ticket orders from
abroad,'' the finance ministry said. ''This year's timing of
school holidays in July and August also influenced the results.''
German manufacturers, the traditional backbone of growth in
the 11-nation euro bloc, have seen financial crises in Asia,
Russia and Latin America curb demand for their products. While
the economy didn't grow at all in the second quarter, many
companies are upbeat about future growth as global demand picks
up.
MAN
MAN, Germany's second-largest truckmaker, said sales in the
first two months of fiscal 2000 rose 2 percent and it expects
profit in the full year to reach last year's level, amid growing
demand in Western Europe. Linde, the world's largest forklift
maker, said first-half pretax profit rose 3 percent, on growing
demand for its products from overseas.
The report is likely to keep alive concern that the ECB will
raise its benchmark interest rate from the current low of 2.5
percent this year, and possibly as early as tomorrow when the 17-
member council gets together for its regular meeting. In Western
Germany orders rose 5.9 percent in the month and 9.5 percent in
the year. In Eastern Germany, which accounts for a tenth of
economic activity, orders fell 4.6 percent in the month and
declined 0.5 percent in the year.
Revision
In a two-month comparison, which smoothes out short-term
fluctuations, all-German factory orders were up 5.0 percent in
volume terms in July/August from May/June as well as from the
same period a year earlier.
Separately, the ministry revised prior figures to show that
pan-German factory orders rose 1.4 percent in July, compared with
the original estimate of a rise of 1.3 percent.
All year-on-year figures are calculated by Bloomberg News,
based on the Bundesbank's most recently published index figures.
The figures are frequently revised and updated.
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