German industrial orders beat expectations in December

BERLIN (Reuters) -German industrial orders rose in December, beating forecasts and posting the biggest increase in more than a year thanks to strong domestic and eurozone demand.

New orders increased by 3.2% on the month on a seasonally and calendar-adjusted basis, the federal statistics office said on Monday.

A Reuters poll of analysts had pointed to a 2.0% increase for the month, after an upwardly revised drop of 4.4% in November.

"Demand in the manufacturing sector has stabilized at the end of 2022," the economics ministry said.

The latest order data, as well as the improvement in the business climate in recent months, indicate that the economic slowdown is likely to be milder in winter than previously expected, the ministry added.

German manufacturers started 2023 with a slightly brighter outlook on the year ahead, as the S&P Global's final Purchasing Managers' Index (PMI) for manufacturing rose to 47.3 in January from 47.1 the previous month. Nevertheless, the main drag on the headline index was still new orders.

The December increase is mainly due to large-scale orders, the statistics office said. Excluding large-scale orders, there was a 0.6% decline for the month.

"Although December's increase offsets a considerable part of the previous month's decline, the trend in orders continues to point clearly downward, especially as the increase in December alone was due to an unusually large number of large-scale orders," said Ralph Solveen, deputy chief economist at Commerzbank.

As order backlogs appear to be shrinking, industry is more likely to slow down the German economy this year, Solveen said.

A separate survey by the Ifo Institute showed on Monday that sentiment in Germany's chemicals industry deteriorated in January.

With a few exceptions, new orders fell continuously throughout 2022 and were 10.1% lower in December than in the same month of 2021 in calendar-adjusted terms.

New orders in December were slightly above pre-pandemic levels, up 1.2% compared with December, 2019.

The statistics office has published a statement with more economic data.

(Reporting by Friederike Heine and Maria Martinez,Editing by Rachel More and Ed Osmond)