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German machines still stalled

ORDERS for German machinery showed another sharp annual decline in May as the global recession hurt demand, an industry group said yesterday, although retail sales managed a small monthly increase.

The Frankfurt-based VDMA group said machinery and factory equipment orders were down 48 percent on the year in May. Orders from inside Germany fell by 42 percent, while those from abroad were down 51 percent.

That was an improvement on the 58 percent overall drop seen in April.

However, the group said customers worldwide did not yet have sufficiently positive expectations for the economy and their businesses to warrant ordering new machinery.

"So far, there has been little relief," Ralf Weichers, VDMA's chief economist, said in the report.

VDMA said for the March-May period orders were 47 percent lower than in the same three months of 2008. Germany, Europe's biggest economy and the world's largest exporter, went into recession in last year's third quarter as the global economic crisis eroded demand.

In a separate report, the Federal Statistical Office said retail sales fell 2.9 percent on the year in May, although the equivalent month last year had one more shopping day. However, it said sales were up 0.4 percent on the month. That was the third consecutive increase, said Alexander Koch, an economist at UniCredit in Munich.

"The so-far comparatively subdued impact of the deep recession on the labor market is supporting the purchasing power of private households," Koch said in a research note.

The Association of German Retailers said it expected retail sales to decline about 2 percent for the whole of 2009, with around half of the drop due to the effect of two fewer shopping days this year.

"That is not dramatic in comparison with other sectors," said its President, Josef Sanktjohanser. "But ... we should not play down the development."


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