Germany sees growth jump but economy still fragile

FRANKFURT — Germany's manufacturing industry recorded a surprise growth in the volume of new orders in June, while other indicators remained mixed, signaling a fragile recovery of the economy.

Real (price-adjusted) new orders in manufacturing in June were 3.9 percent higher than in May, according to provisional figures released on Tuesday by the Federal Statistical Office. Previously, new orders had declined for five months in a row.

Meanwhile, new orders in manufacturing in the second quarter were 1.4 percent lower than in the first quarter. Automotive industry orders recorded the biggest monthly growth of 9.3 percent from May to June.

Industrial production increased by 1.4 percent in June month-on-month. The biggest growth — 7.5 percent — was once again recorded in the automotive industry compared with the figure in May.

However, analysts cautioned against reading too much into the improved June statistics, saying it remains early to predict an economic turnaround on the horizon after recessions in the past two years.

The increase should not be "overestimated" and "only signals bottoming out", said Joerg Kraemer, chief economist at Commerzbank in Frankfurt. Describing the increase as a "positive surprise", Kraemer said the June reading was just a "counter-movement to the sharp drops in orders in May".

Grimmer picture

Other indicators depict a grimmer picture for the German economy, which was the worst performer among major European Union economies last year.

A survey published on Wednesday by the Ifo Institute for Economic Research in Munich showed that a steady decline in orders has been a key factor impeding the German economy.

A growing number of companies involved in the survey reported a lack of new orders in July. In the manufacturing industry, 43.6 percent of respondents confirmed the lack of new orders, as opposed to 39.5 percent in June.

"Almost every industry is affected," Klaus Wohlrabe, deputy director of the Center for Macroeconomics and Surveys at Ifo, said.

The weakness of the German economy can be blamed on temporary headwinds such as sticky inflation, but the country will have to address some fundamental problems to improve its growth prospects, according to an International Monetary Fund report.

Xinhua