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German manufacturing orders post surprise Dec drop

BERLIN: German manufacturing orders fell by a seasonally adjusted 1.9 percent in December, data showed on Friday, surprising analysts who had expected a positive number and sending the euro lower against the U.S. dollar.

The Finance Ministry said the drop, which followed a monthly rise of 1.5 percent in November, had been skewed by a sharp fall in orders in formerly communist eastern Germany after a busy November.

It added, however, that the underlying trend of orders growth in Europe's largest economy remained positive.

"Comparing the latest two months with the previous two months, which smoothes out random monthly variations and better reflects the underlying trend, there was a rise in national orders of 2.2 percent," the ministry said in a statement.

Manufacturing orders in western Germany, which account for around nine-tenths of national industry, were down 1.0 percent in December from the previous month. Orders in the east were off 12.7 percent after November's 9.3 percent rise.

Year-on-year growth in orders, a key leading indicator, fell from 12.9 percent in November to a still-buoyant 11.2 percent, based on a comparison with Bundesbank historical data.

Analysts were nevertheless disappointed by the figure, which fell far short of a consensus forecast of a rise in December of 0.4 percent.

They also highlighted a 2.9 percent slide in foreign orders whereas domestic orders were down just 1.2 percent. All the figures were provisional.

"This is a clear disappointment," Hans Juergen Meltzer, an economist at Deutsche Bank in Frankfurt, told Reuters Television.

"As far as I can see, the only explanation for the dip in the numbers is that foreign orders were very high in November owing to big ticket items."

The euro eased against the dollar on the foreign exchange market, partly reversing the gains it posted in response to the quarter-point interest rate increase announced by the European Central Bank on Thursday.

The currency traded below $0.99 in Europe, down half a cent from Thursday's one-week peak of $0.9946.

The disappointing December orders number followed strong gains for the month in key measures of business confidence, such as the Ifo Index. The BME/Reuters purchasing managers' index peaked in December before showing slower growth in January.

Uwe Angenendt, chief economist at BHF-Bank, said it was important to see December's orders decline against the background of sharp gains in the previous two months.

"I still think the average for the quarter will show a clear rise. Perhaps orders fell because firms were holding back ahead of the millennium changeover. I don't see this as a reversal of the general economic upturn, it's a distortion," he said.

Separately, the Federal Statistics Office announced a fall in German wholesale sales in December of 1.7 percent in real terms from the previous month. Wholesale sales were up 2.8 percent year-on-year, also seasonally adjusted._Reuters