Euro zone pain hits German industry orders in June

Tue Aug 7, 2012 7:29am EDT
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By Michelle Martin

BERLIN (Reuters) - German industrial orders fell more than expected in June as domestic and euro zone demand faltered, indicating the single currency bloc's debt crisis is taking its toll on Europe's largest economy.

Data from the Economy Ministry showed seasonally and price-adjusted orders dropped 1.7 percent on the month, coming in below the mid-range forecast in a Reuters poll of 38 economists for a 1 percent fall on the month.

Contracts from elsewhere in the euro zone fell by 4.9 percent on the month while domestically they dropped by 2.1 percent. The only bright spot was orders from non-euro zone countries, which were up 0.6 percent month-on-month.

"The lack of dynamism in new orders in the past few months reflects the weak economic environment in Europe," said Bernd Hartmann, head of investment research at VP Bank.

"As long as there is uncertainty about how the euro zone debt crisis will develop, even Germany's very competitive economy will suffer due to weaker demand," he added.

Germany's industrial output remains relatively robust compared to production in other euro zone countries like Italy, where it dived 1.4 percent on the month in June, pointing to a fourth consecutive quarterly drop in gross domestic product.

But Tuesday's figures add to increasing signs of gloom in Germany, where the manufacturing sector shrank at its fastest pace in more than three years in July while new orders in the service sector declined to the weakest level in just over three years.

Sentiment surveys have also slipped, with the closely-watched Ifo business climate index hitting its lowest in more than two years in July. Moreover, retail sales have fallen and the number of Germans out of work has increased.   Continued...

An employee of German car manufacturer Mercedes Benz works on a Mercedes B-class car at the Mercedes plant in Rastatt July 16, 2012. REUTERS/Alex Domanski