German manufacturing orders rose much more than expected in October, boosted by an above-average number of big-ticket items and as the weaker euro helped underpin foreign demand, preliminary data showed on Tuesday.
Orders advanced 2.0 percent in seasonally adjusted terms from September, the Economy Ministry said. It was the fifth big gain in six months and easily outstripped the consensus forecast in last week's Reuters poll for a rise of 0.5 percent.
"With October's increase in orders, the recovery in demand for manufactured goods continued. The strong impulses for demand are still coming from abroad," the ministry said.
"But domestic demand is also showing a marked upwards trend. Hopefully this means we will have a good final quarter to the year," it added.
The euro initially rose by more than a tenth of a cent against the dollar following the data.
The single currency's 13 percent decline against the dollar since the beginning of the year has helped Germany's exporters as it makes their goods cheaper in relative terms on world markets where the US currency is widely used. Big exporters including carmakers BMW and DaimlerChrysler and engineering giant Siemens reported higher-than-expected sales in the quarter to end September.
FIRMER OUTPUT Gerd Hassel, an economist at BHF Bank, said the orders data suggested Thursday's Economy Ministry report on industrial production in October could also beat expectations.
The median forecast of 50 economists polled by Reuters last week was for a monthly gain in output of 0.5 percent.
Morgan Stanley economist Elga Bartsch said the October orders data boded well for fourth-quarter gross domestic product (GDP) in Europe's biggest economy.
Morgan Stanley was predicting a quarter-on-quarter gain in GDP of 0.4 percent in the October through December period after an increase of 0.6 percent in the third quarter.
"I think it's time that analysts raised their 2006 growth forecasts for Germany. We're expecting growth of 1.8 percent next year," she added. Most economists expect 2005 expansion of around 1.0 percent.
However, HVB Group economist Alexander Koch said strong gains in manufacturing orders were unlikely to continue into next year. The Ifo Institute's closely-watched gauge of German business sentiment, seen as a leading indicator for the wider euro-zone economy, fell more than expected in November.
"If (German) business sentiment has already reached its peak or is about to peak, as we expect, economic activity should moderate again already in the first quarter of 2006," Koch said.
Foreign orders advanced by 2.8 percent in October, helped by a 5.0 percent gain in consumer goods and a 4.2 percent increase in intermediate goods, the ministry said. Domestic orders rose 1.2 percent.
September's monthly gain in orders had been revised down to 2.9 percent from 3.0 percent. The Bundesbank typically revises the Economy Ministry's preliminary orders data about two weeks after its initial publication.
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