Industrial orders in Germany down unexpectedly in May, led by drop in demand from euro area

BERLIN — Orders for Germany's industrial goods dropped unexpectedly in May, led by a fall in demand from other countries in the euro area and at home, official data showed Friday.

Orders were down 1.3 percent compared with the previous month, the Economy Ministry said. That contrasted with economists' forecast of a 1.2 percent increase.

Orders from elsewhere in the group of 17 European Union countries that use the euro declined 3.9 percent, while orders from inside Germany dropped 2 percent. But demand from countries outside the eurozone rose 1.1 percent.

It was the second consecutive drop for the country, following a 2.2 percent decline in April. The ministry pointed to fluctuations in the number of large orders, which it said were below average in May, as one source of volatility over recent months.

Without bulk orders, the general direction "remains upward, if less clearly than before," it said in a statement.

Germany has Europe's biggest economy and so far has weathered the continent's debt crisis well — helped by its traditional export strength and a robust job market that is fueling domestic demand.

Friday's numbers are disappointing but "have to be taken with a pinch of salt," said Carsten Brzeski, an economist at ING in Brussels. May had an unusually high number of public holidays this year, which probably blurred the picture to some extent, he said.

Brzeski noted that the underlying trend of industrial orders in recent months has been "slightly positive" despite falling demand from other countries that use the euro. He said that, while fairly well-filled order books should ensure a gradual pick-up in production in the longer term, "the medium-term outlook is not yet looking rosy."

On Thursday the VDMA group, which represents Germany's machinery producers, said it is now forecasting a 1 percent drop in production this year — compared with the 2 percent increase it predicted last September.

It pointed to a disappointing start to the year, particularly in the German market, but noted that exports to the key Chinese and U.S. markets have started increasing again.