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Industrial orders jump 5.2 percent

German industrial orders surged by a surprise 5.2 percent in November from the level in October, provisional data showed on Thursday, a sign Europe's largest economy should remain robust in coming months.

Published: 6 January 2011 13:07 CET

Industrial orders jump 5.2 percent

Photo: DPA

The performance reinforced the importance of Germany’s export-orientated industry within the EU and eurozone economies.

Analysts polled by Dow Jones Newswires had forecast a monthly increase of

1.0 percent following a rise of 1.6 percent in October, but the figures also revealed a continued and worrying slump in orders from other eurozone members.

A breakdown of the Economy Ministry data indicated that most of the demand came from abroad, with an increase of 8.2 percent, while domestic orders gained a more modest 1.5 percent.

Large orders from abroad for investment goods such as machine tools showed a rise of 9.1 percent as expanding activity in Asia and the Middle East boosted demand for German goods.

The Economy Ministry welcomed the result and took pains to underscore that the result was not only the result of large orders.

“The industrial sector is beginning the year with a good order book,” a statement said.

ING senior economist Carsten Brzeski noted that “German companies had already piled up enough backlogs to keep production running smoothly throughout 2011 and the continuing inflow of new orders could even create production bottlenecks in the coming months.”

But demand from eurozone partners declined by 1.4 percent, which could suggest the now 17-nation bloc is headed for a two or three-speed recovery.

Core countries such as France and Germany appear set for solid growth this year while others could stagnate or even slip back as austerity measures take effect and consumption is curtailed.

On a sliding two-month basis, eurozone orders fell by 8.5 percent in October and November compared with August and September.

The German central bank has forecast growth of 2.0 percent in 2011, with unemployment expected to decline further and business investment tipped to profit from ultra low interest rates.

In Brussels meanwhile, a key European Union indicator showed that confidence in the entire crisis-hit eurozone rose in December, pulled by strong readings in France and Germany.

AFP/mry

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How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year.

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’, Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn.

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment?

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024 about 1 percent below the estimated structural level.

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending?

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”. The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”.

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025.

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023.

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write.

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers.

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”

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