German manufacturing orders held steady from the prior month in February but an upward revision to the January figure showed a recovery in the economy's industrial backbone is intact. Adjusted for seasonal swings, orders held steady on the month, preliminary Economy Ministry data released on Wednesday showed. January's reading was revised up to show a rise of 5.1 percent compared to the 4.3-percent gain previously reported.
Economists polled by Reuters had forecast orders would dip by 0.7 percent on the month in February. In January and February combined, orders rose by 3.7 percent compared with the previous two months. "This is a very good start to the new year. The recovery in German industry is continuing," said Citigroup economist Juergen Michels. "We expect economic growth of 0.2 percent or 0.3 percent in the first quarter. The harsh winter has prevented a sharper rise," he added.
The economy emerged from its deepest post-war recession in the second quarter of last year before stalling over the winter. A breakdown of the orders data showed that domestic orders fell by 1.9 percent, while foreign orders rose by 1.8 percent. Demand for intermediate goods rose 2.1 percent, while orders for investment goods dipped 0.6 percent. "A positive trend in orders activity both with intermediate goods ... and with major capital goods sectors like engineering, together with a solid business climate, suggest the recovery in industry should continue," the ministry said in a statement.
German business sentiment surged in March to its highest level since June 2008. The firmer business morale reading added to signs that the German economy - Europe's largest - is picking up again. German unemployment fell unexpectedly in March, posting its biggest drop since June 2008.
A purchasing managers' survey released earlier on Wednesday showed Germany's services sector grew at its fastest pace in nearly two years in March, bolstered by a sharp rise in new orders. A similar survey for the manufacturing sector last week showed that a jump in output and new orders helped German manufacturing activity to expand in March at its fastest pace since April 2000. Manufacturers in sectors like engineering, autos and chemicals drive Germany's export engine, on which the broader economy is reliant for growth.
Germany's new car market shrank for a fourth consecutive month in March, still feeling the impact of the end last year to government incentives for new car buyers, but the sector is seeing demand from abroad. "The sentiment in the automotive industry is brightening up," said Matthias Wissmann, president of the VDA German automaker association. "We will not reach last year's level in 2010, but we see a good year for exports. The German automotive industry will benefit strongly from the dynamic development in growth markets," he said.
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