September 4, 2014 / 6:27 AM / 3 years ago

German July orders rebound in strongest rise in over a year

BERLIN (Reuters) - German industrial orders rose far more than expected in July in their sharpest increase in more than a year, driven by robust demand for capital goods from abroad, and raising hopes for a rebound in Europe’s biggest economy in the third quarter.

Economy ministry data released on Thursday showed a 4.6 percent month-on-month increase in orders in July, way over the Reuters consensus forecast for a 1.5 percent increase.

“After the uncertainty caused by geopolitical developments and a weaker economy in the second quarter, the strong rise in orders is an encouraging signal for the industrial economy,” said the ministry in a statement.

The ministry said big-ticket items had played a role in the increase but underlying activity was also positive.

“Finally some sign of relief. German new orders rebounded sharply in July, providing evidence that the euro zone’s largest economy should return to growth in the third quarter,” said ING economist Carsten Brzeski.

Germany’s economy shrank by 0.2 percent in the second quarter due to weak investment and slow trade. Some economists fear Europe’s economic engine will slip into recession in the third quarter.

Markit’s composite Purchasing Managers’ Index (PMI) showed on Wednesday that Germany’s private sector expanded at its slowest pace in 10 months in August as manufacturing grew at a weaker rate.

Orders for capital goods rose 8.5 percent, driven by a 14.6 percent increase in demand from countries outside the euro zone while contracts from members of the single currency rose just 2.9 percent.

“On a more negative note, however, the only marginal improvement of new orders from other euro zone countries shows downside risks for the German economy currently do not mainly come from geopolitical tensions but rather from longer-than-expected weak demand from euro zone peers,” said Brzeski.

The July increase in overall orders was the strongest since June last year. The data for June this year was revised up to -2.7 percent from -3.2 percent previously.

Reporting by Madeline Chambers; Editing by Stephen Brown

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