San Francisco Frontiers - German factory orders plunge as recovery still fragile

New orders, a key indicator of future business activity, were down 10.6 percent from a month earlier due to a drop in large-scale domestic orders, according to provisional data from statistics agency Destatis.

It was the first decline in four months and more than the one-percent decrease forecast by analysts surveyed by the financial data firm FactSet.

The long-stagnant German economy has been slowly recovering on the back of massive public spending, with some recent data generally pointing to signs of growing strength.

The economy ministry said August's order data thus represented a "marked setback".

But it also noted that without the fall in big orders, the situation was virtually unchanged from July.

August's drop was driven by lower domestic orders. There was a more than 60-percent decrease in the category that includes military vehicles, aircraft, ships and trains.

Orders in this area have boomed in recent times as Germany spends huge sums on its military to face a hostile Russia and amid worries over US security guarantees to Europe.

The ministry emphasised that the growing importance of public procurement meant that orders were "highly volatile".

On a less volatile three-month on three-month comparison, new orders from June to August were 1.3 percent higher than in the previous three months.

The energy shock from the US war against Iran has added to headwinds for Germany's recovery, but the economy has withstood the fallout better than initially feared.

Leading economic institutes recently doubled their growth forecast for this year to 1.3 percent.

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J.Peterson--SFF