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German factory orders rebound after 2 declines, indicate economy not taking major Ukraine hit

BERLIN - Factory orders in Germany rebounded sharply in July following two monthly falls, official figures showed Thursday, in an indication that Europe's biggest economy is holding up despite the crisis in Ukraine.

The Federal Statistical Office said orders were up 4.6 per cent from the previous month, far better than 1.5 per cent increase widely anticipated in the markets. The increase follows an upwardly adjusted decline of 2.7 per cent in June and a 1.7 per cent fall in May.

The rebound was powered by an above-average number of bulk orders and a 9.8 per cent increase in demand from outside the 18-country eurozone. Orders from inside the eurozone rose only 1.7 per cent after plunging in June.

"So far, there has not been any significant impact on overall hard data stemming from the Russian-Ukrainian crisis," said UniCredit economist Andreas Rees, who noted that the previous two months' declines resulted from a lack of big-ticket orders and other volatility.

After a long period of strong growth, Germany's economy has shown signs of faltering. In the second quarter, it shrank 0.2 per cent from the previous three-month period and concerns that the Ukraine crisis could take a greater toll have escalated as the European Union and Russia have imposed tit-for-tat sanctions.

ING-DiBa economist Carsten Brzeski said the figures pointed to a return to growth in the third quarter and that potential obstacles to German growth don't stem primarily from "geopolitical tensions but rather from longer-than-expected weak demand from eurozone peers."

Though Russia was only Germany's No. 11 trading partner last year, a raft of economic indicators over recent weeks has shown that the crisis in Ukraine is at least having an effect on business confidence.

The resulting effect on investment "is easily the larger problem, because our trade with Russia is not so extensive that we ourselves are affected immediately or strongly by sanctions," Economy Minister Sigmar Gabriel said earlier this week.

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David Rising contributed to this report.

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