German economy
July 7, 2009
Data shows that orders in Europe's largest economy rose at the strongest monthly pace in May in nearly two years.
"This underscores expectations that we have the worst behind us," said HSBC Trinkaus economist, Lothar Hessler.
Industrial orders climbed 4.4 percent compared to April, prompting the German Economics Ministry to predict that "the outlook for a broader stabilization of industrial output has been consolidated."
Germany's export-dependent industrial backbone suffered inordinately through the winter months because of the global economic downturn. Orders, sales and production all dropped precipitously.
The May figures showed that foreign customer orders rose 5.2%, while domestic orders had a plus of 3.9%. Above average improvements were registered by the auto and auto parts industry and manufacturers of investment goods, like machinery and factory equipment.
Room for cautious optimism
The euro responded to the news with gains across the board, while shares climbed and energy and commodity prices rebounded.
But, despite an upward trend since March, German industry is still far short of its order figures for 2008. Compared to a year ago, orders were nearly 30% below last May. In April the figure was 37%.
Investors remain cautious after warnings from the OECD that the global economic recovery was still far from secure. OECD Secretary-General Angel Gurria said that governments risked killing a rebound if they cut off stimulus spending too soon.
A European Commission study has also warned that Europe's economy may shrink further due to the economic crisis, if the right policies are not implemented and if Europe fails to resolve problems in the financial sector.
Critics already accuse European commercial banks of sitting on top of billions of euros in liquidity provided by central banks, unwilling to loan funds to businesses in need, out of fear that the downturn could worsen later in the year.
gb/dpa/AP/Reuters
Editor: Chuck Penfold