September 4, 2015 / 6:47 AM / 2 years ago

RPT-UPDATE 2-German industry orders fall in July on weak foreign demand

3 Min Read

* Orders fall 1.4 pct month-on-month

* Domestic demand up 4.1 pct, foreign orders down 5.2 pct

* Economy Ministry says orders trend remains upward

* BGA trade body says concerned about China (Repeats to fix technical glitch)

BERLIN, Sept 4 (Reuters) - German industrial orders fell more than expected in July on lower foreign demand, pointing to some weakness in the export engine that supported growth in Europe's largest economy in the first half of this year.

Contracts for goods fell by 1.4 percent on the month, the Economy Ministry said on Friday, undershooting the Reuters consensus forecast for a 0.6 percent drop.

Factories received 5.2 percent fewer bookings from abroad, while domestic orders rose by 4.1 percent. The data adds to a picture of domestic strength in Germany, but waning foreign demand.

The engineering sector fared particularly well, with domestic demand for machinery soaring by 21 percent on the month - the biggest rise since East and West Germany reunified almost 25 years ago.

"The real problem is what is going on with world trade," Stefan Schilbe from HSBC Trinkhaus said. "There is a lack of growth drivers for the global economy."

Bookings from countries beyond the euro zone plunged by 9.5 percent - their biggest drop since the depths of the global financial crisis in early 2009.

Commerzbank economist Ralph Solveen said that figure could be a sign that problems in emerging markets were taking an increasing toll on German firms.

The BGA trade association on Friday expressed concern that China could become a burden for Germany, which has the greatest exposure to the Asian nation of all EU members.

"A lot of upper middle class Chinese people have lost a lot of money," BGA President Anton Boerner said of recent stock market turmoil in China.

"If you lose a lot of money, you don't buy a Porsche."

Nonetheless, Mercedes-Benz is yet to feel the pain from China's troubles, reporting on Friday that deliveries to China soared 53.1 percent in August.

UniCredit economist Andreas Rees warned against reading too much into the data, saying weak foreign appetite was not due to a "China effect" but was rather a "breather" after a strong rise in demand from abroad in June.

Other data has been broadly positive, with German retail sales climbing at the strongest pace in nine months in July and private sector growth picking up.

In August, business morale rose, but the exports that drove a second-quarter expansion may falter later this year if China's slowdown hits the economy, the Ifo economic institute said.

Schilbe at HSBC said the weak oil price should support domestic and euro zone demand.

The Economy Ministry said the trend in industry orders remained upwards, despite the drop in July, adding that the euro zone's economic recovery and the weak euro were helping.

The orders data for June was revised down to a 1.8 percent increase from an originally reported 2.0 percent rise. (Reporting by Paul Carrel, Caroline Copley, Rene Wagner and Michelle Martin; Editing by Jane Merriman and Hugh Lawson)

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