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September 7, 2016

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German factory orders hint at slowdown

GERMAN industrial orders eked out a smaller-than-expected rise in July and showed a decline in domestic demand, underlining growing concerns that Europe’s economic powerhouse is slowing down.

Contracts for goods “Made in Germany” gained 0.2 percent in July, the Economy Ministry said yesterday. That was weaker than a Reuters consensus forecast for a rise of 0.5 percent.

Domestic demand fell by 3 percent while foreign orders rose by 2.5 percent, with demand from eurozone countries jumping by 5.9 percent.

“Domestic demand for goods is disappointing again,” DIHK economist Sophia Krietenbrink said, adding that the data pointed to weaker consumption in the coming months.

The surprisingly low order intake from home added depth to a picture of lackluster investment among German companies while European peers seem more willing to open their pockets.

This was also reflected in a forecast by Munich-based Ifo institute for Germany’s current account surplus to hit a new record of US$310 billion in 2016, overtaking that of China again to become the world’s largest.

Ifo economist Christian Grimme said exports exceeded imports by US$159 billion in the first half of the year, mainly due to strong demand from other European countries.

The institute said the German surplus would be equivalent to around 8.9 percent of gross domestic product, meaning it would once again breach the European Commission’s recommended upper threshold of 6 percent.

This is likely to fuel the debate about Germany’s economic role. Brussels and Washington have urged Berlin repeatedly to lift domestic demand to help reduce global economic imbalances.

Speaking in parliament to present the federal budget, Finance Minister Wolfgang Schaeuble rejected such criticism, saying Berlin was raising state spending while also using other measures to lift domestic demand.

“We are playing our part in strengthening global demand. No other country in Europe is spending more on investment than Germany,” Schaeuble said.


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