German engineering sector reports largest rise on record

Germany's engineering sector continues to drive the country's recovery as orders in the sector leapt by a record 62 percent in June, data showed on Monday, indicating Europe's largest economy could accelerate in the second half.
The growth in orders, topping a 61 percent increase in May from a year earlier, was boosted by a base effect but was also driven by strong demand from emerging markets for high-end German plant and engineering equipment.
It was the strongest growth since comparable data was first collected by industry association VDMA in 1977 and, in an encouraging sign, showed growth in domestic orders outpaced growth in orders from overseas, suggesting the economy may become less reliant on exports for growth.
"It's good news, especially for the second half of the year as most of these orders will impact the economy then," VDMA economist Olaf Wortmann said. "But there are base effects - June 2009 was one of the worst months in past years," he added.
The figures add momentum to a stream of positive news that has led economists and politicians to raise the possibility that German gross domestic product will grow 2 percent or more this year, beating an official government forecast of 1.4 percent.
German business sentiment leapt unexpectedly by a record margin in July to reach its highest level in three years, a survey by the Munich-based Ifo economic think tank showed last week. And data released last week showed sales at industrial conglomerate Siemens - a bellwether for the German economy - rose in its third quarter after declining for nearly two years, helped by rising emerging market demand and a weak euro.
Last month the VDMA raised its 2010 output forecast, expecting production volumes to grow thanks to a flood of orders from China and emerging markets. Germany has its exports to thank for recovering from its deepest post-war recession, but June's engineering data showed domestic demand is also picking up, widening the rebound's base.
Engineering orders from within Germany grew by 67 percent in June, the data showed, outpacing orders from abroad, which rose by 60 percent. More complete data on German industry orders will be released on Wednesday. The Reuters consensus forecast is for orders to have grown again in June, by 1.5 percent, after a 0.5 percent contraction in May.