German orders surge fuels talk of ECB rate hikes

German manufacturing orders rose for a second straight month in March, boosting the first quarter growth outlook and giving the European Central Bank fresh evidence to justify further rate increases. Adjusted for seasonal swings, orders increased 2.4 percent on the month, preliminary Economy Ministry data showed on Monday.
This beat all forecasts in a Reuters poll of economists, whose mid-range prediction was for a decline of 0.5 percent. Orders were up by 3.9 percent on the quarter during the first three months of 2007, after a decline of 0.4 percent in the fourth quarter, according to Federal Statistics Office data.
The strength of manufacturing has helped to dispel fears that first quarter growth would be stifled by a three percentage point increase in value added tax (VAT) on January 1, which hit consumer spending significantly. Gerd Hassel, an economist at BHF-Bank, said the March orders figures were "astonishing" and augured well for the future.
A run of unexpectedly strong figures has prompted analysts to raise their growth forecasts for Europe's largest economy. On Monday, the European Commission followed suit, predicting 2.5 percent growth in 2007 after a February estimate of 1.8 percent.
Economy Minister Michael Glos said it showed Germany had transformed itself from a laggard to a growth motor for Europe. The ministry said there was an unusually high volume of big ticket orders in March, and that the outlook for coming months remained bright thanks to buoyant business sentiment.
A breakdown of the data showed domestic orders rose 2.9 percent on the month in March, while foreign orders climbed by 2.1 percent. Capital goods and intermediate goods orders both increased, while demand for new consumer goods fell. February orders data were revised up 0.4 percentage points to show an increase of 4.3 percent, the ministry added
Germany's Federal Statistics Office is due to publish a preliminary estimate of first-quarter gross domestic product on May 15, with a detailed breakdown to follow on May 24.