2018.07.0508:45:00UTC+00German Factory Orders Recover At Faster Pace

Germany's factory orders expanded for the first time in five months in May, largely on robust domestic demand.

Factory orders grew 2.6 percent month-on-month in May, in contrast to a revised 1.6 percent drop in April, data from Destatis showed Thursday. Orders were expected to climb moderately by 1.1 percent.

Excluding major orders, manufacturing orders climbed 2.2 percent in May. Overall domestic orders grew 4.3 percent and foreign orders gained 1.6 percent, driven by a 6.7 percent rise in euro area demand.

Manufacturers of capital goods logged an increase of 4.7 percent and demand for consumer goods advanced 4.9 percent. Meanwhile, manufacturers of intermediate goods reported a 0.6 percent drop.

On a yearly basis, new orders in manufacturing advanced by a more-than-expected 4.4 percent and was much bigger than the revised 0.8 percent rise seen in April. Economists had forecast orders to grow 1.7 percent.

The economy ministry said industrial activity is likely to remain moderately up in the coming months.

Industrial production will stabilize in the coming months and that the upswing will continue despite the current pronounced phase of weakness, Ralph Solveen, a Commerzbank analyst, said.

Data showed that manufacturing turnover increased 0.9 percent on the month in May, reversing a 0.1 percent drop in April.

Construction activity growth remained strong in June, despite easing since May, the Purchasing Managers' survey data released by IHS Markit showed on Thursday. The construction PMI fell to 53.0 in June from 53.9 in May.

The largest euro area economy will grow 2.2 percent in 2018 and 2.1 percent next year, the Executive Board of the International Monetary Fund, said in its the Article IV consultation report for Germany, released Wednesday.

The IMF board observed that the outlook is for the expansion to continue in the near term, but slow markedly over the medium to long term, reflecting unfavorable demographics and productivity trends.

According to the IMF, short-term risks are substantial, as a significant rise in global protectionism, a hard Brexit, or a reassessment of sovereign risk in the euro area, leading to renewed financial stress, could affect Germany's exports and investment.