German factory orders dropped the most in almost three years in November as the euro region economy edged toward a recession and global demand weakened.
Orders (GRIORTMM), adjusted for seasonal swings and inflation, slipped 4.8 percent from October, when they surged a revised 5 percent, the Economy Ministry in Berlin said in a statement today. That’s the biggest drop since January 2009. Economists forecast a decline of 1.8 percent, according to the median of 25 estimates in a Bloomberg News survey (GRIORTMM).
While the euro region’s sovereign debt crisis has clouded the outlook and cooling global growth is hurting export orders, Europe’s biggest economy may still avert a recession. Unemployment at a two-decade low is helping to bolster consumer sentiment, service industries expanded in December and business confidence (GRIFPBUS) unexpectedly rose for a second month.
German Slowdown
From a year ago, orders (GEIOYY) fell 4.3 percent in November when adjusted for work days, today’s report showed. The ministry had previously reported a gain of 5.2 percent in October from September.
Orders from euro-region nations fell 4.1 percent from October, when they rose 8.2 percent, today’s report showed. Orders from outside the currency union slumped 10.3 percent, while domestic orders slipped 1.1 percent. Demand for investment goods fell 6.5 percent in the month, while declining 2 percent for consumer goods.
German economic growth will slow this year as demand from its main euro-area trading partners slumps, two economic institutes that advise Chancellor Angela Merkel’s government said last month. The Kiel-based IfW institute said growth will slow to 0.5 percent from 2.9 percent in 2011, while the RWI in Essen sees expansion decelerating to 0.6 percent from 3 percent.
.......................................................................
Euro-Area Economic Confidence at Two-Year Low
European confidence in the economic outlook fell to the lowest in more than two years and unemployment remained at a 13-year high as the euro area’s leaders struggled to contain a worsening fiscal crisis.
An index (EUESEMU) of executive and consumer sentiment in the 17- nation euro area fell to 93.3 in December from a revised 93.8 in the previous month, the European Commission in Brussels said today. That’s in line with the median of 19 economists’ estimates (EUESEMU) in a Bloomberg survey. The unemployment rate held at 10.3 percent in November, a separate report showed.
French President Nicolas Sarkozy and German Chancellor Angela Merkel will meet on Jan. 9 to discuss Europe’s new fiscal pact before a European Union summit at the end of the month. As governments tighten austerity measures amid high unemployment (UMRTEMU), households and businesses are more reluctant to spend and the prospect of a recession looms.
Record Earthquake
Luxembourg Prime Minister Jean-Claude Juncker said on Jan. 4 that the EU is on the brink of a recession of unknown scope. The European Central Bank forecasts that the region’s economy will expand 0.3 percent in 2012, while the European Commission sees growth at 0.5 percent.
The euro is headed for a fifth weekly loss against the dollar. The single currency fell earlier today to $1.2764, the lowest since September 2010, before recovering to $1.2808 at 11:06 a.m. in Brussels, up 0.2 percent on the day.
The gloomy economic indicators in Europe followed the news from Asia that Japan’s recovery from the aftermath of a record earthquake was probably cut short in the fourth quarter as the impact of the euro-area fiscal crisis outweighed the support from reconstruction spending.
Gross domestic product (JGDPAGDP) probably shrank in October and November, pointing to a 0.1 percent contraction for the quarter, according to calculations by the Japan Center for Economic Research, an independent analysis group in Tokyo. A third contraction in four quarters would widen Japan’s gap with China, which overtook it as the world’s second-largest economy in 2010.
