German Factory Orders Fall The Most In Over 2 Years

(RTTNews) - Germany's manufacturing orders unexpectedly decreased in February at the fastest pace in over two years, mainly driven by a slump in foreign demand, and damped hopes of a rebound in the biggest euro area economy.

Elsewhere, the country's leading economics research institutes slashed their forecast for economic growth this year, but re-affirmed that the likelihood of a recession is very small.

Factory orders dropped 4.2 percent month-on-month, preliminary figures from the Federal Statistical Office showed on Thursday, while economists had forecast a 0.3 percent increase.

Manufacturing orders dropped for a second straight month and the fall was the biggest since January 2017, when orders decreased at the same pace.

January's decline was revised to 2.1 percent from 2.6 percent.

Caution is set to prevail in the industrial sector in the coming months, mainly due to a lack of demand for exports, the Economy Ministry said.

"Awful new order data suggests that German industry is still suffering from Brexit woes and global uncertainties," ING economist Carsten Brzeski said.

The February weakness in manufacturing orders was broad-based.

Domestic orders decreased 1.6 percent and foreign orders fell 6.0 percent in February. Demand from the euro area declined 2.9 percent, and bookings from other countries shrunk 7.9 percent.

Intermediate goods orders tumbled 0.9 percent and demand for capital goods fell 6 percent. Orders for consumer goods dropped 3.5 percent.

On a year-on-year basis, factory orders plunged 8.4 percent in February after a 3.6 percent slump in January. Economists had forecast a 3.1 percent fall.

In the January to February period, factory orders decreased 3.7 percent.

The Joint Economic Forecast from the DIW, Ifo Institute, IfW, IWH and RWI think tanks revealed a downgrade to the growth outlook for this year to 0.8 percent from 1.9 percent. The downgrade was mainly attributed to weaker global demand.

The institutes confirmed their growth projection for next year at 1.8 percent.

"If a no-deal Brexit occurs, economic growth this year and the next is likely to be significantly lower than indicated in this forecast," the think tanks warned.

Meanwhile, a survey from IHS Markit showed on Thursday that the German construction sector grew the most in 14 months in March, led by strong gains in residential and commercial activity that boosted job creation.

IHS Markit's purchasing managers' index for the German construction sector rose to 55.6 in March from 54.7 in February, marking the highest reading since January 2018. A PMI reading above 50 suggests expansion in the sector.
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