BERLIN (dpa-AFX) - Germany's factory orders decreased the most in five months in July, largely due to a marked contraction in foreign demand, data from Destatis revealed on Thursday.
Factory orders decreased by a more-than-expected 2.7 percent over the previous month in July, offsetting a revised increase of 2.7 percent seen in June. This was the biggest drop since February.
Economists had forecast orders to drop 1.4 percent after June's initially estimated growth of 2.5 percent.
Domestic orders dropped 0.5 percent and foreign orders decreased 4.2 percent in July. New orders from the euro area gained 0.3 percent, while demand from other countries fell 6.7 percent.
On a yearly basis, overall manufacturing new orders decreased 5.6 percent, faster than the 3.5 percent fall logged in June. Orders were expected to decline 4.2 percent.
Destatis is scheduled to release industrial production data on September 6. Production is forecast to grow marginally by 0.3 percent on the month in July, in contrast to a 1.5 percent fall in June.
Data showed that manufacturing turnover dropped 0.9 percent in July from the previous month after a decrease of 0.1 percent in June.
The economy ministry said in the light of the ongoing international trade conflicts and the restrained business expectations in the manufacturing sector, there are still no signs of a fundamental improvement in the industrial economy in the coming months.
What initially only looked like an order book deflation at high levels has become an industrial slump, Carsten Brzeski, an ING economist, said.
This downward trend is not only driven by weaker foreign demand on the back of trade conflicts and increased uncertainty, the economist noted. Since the start of the year, domestic orders have actually dropped more than foreign orders, suggesting that global woes have reached the domestic economy.
The biggest euro area economy is on the verge of a recession as it contracted 0.1 percent in the second quarter due to weak foreign demand, and there are signs that the shrinking continued into the third quarter, strengthening calls for stimulus.
According to Purchasing Managers' survey, Germany's service sector growth improved in August from a six-month low, which was counteracted by a sharp contraction in manufacturing.
The construction sector activity fell at the fastest rate in over five years in August, led by civil engineering, as order books continued to fall and expectations deteriorated, IHS Markit data showed Thursday.
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