German industrial orders fell unexpectedly in July on feeble domestic demand while bookings from abroad remained flat, data showed. As David Pollard reports, it was a rare sign of weakness in Europe's largest economy but is unlikely to impact ECB policy ahead of a key meeting.
Falling industrial orders are not the image Germany's powerhouse economy wants. But July's numbers DO put a question mark over domestic demand. A 0.7 per cent drop comes after a 0.9 per cent rise the month before. Demand at home falling by 1.6 per cent. Though the economy ministry was at pains to point out that excluding volatile bulk orders, the overall numbers would show a rise. (SOUNDBITE) (English) GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, PETER DIXON, SAYING: "As we go into the third quarter the manufacturing sector will not give quite the same boost to output it has done over the course of recent quarters. But that doesn't mean to say that the economy is on the verge of slowdown. I think we really need to see more evidence from the data before we can extrapolate the trends too far." And with bookings from outside the euro zone up, a stronger euro doesn't appear to be dampening orders either. Though it could dampen ECB ambitions to roll back its massive monetary stimulus programme. If a stronger single currency undermines demands for exports - and holds back inflation. (SOUNDBITE) (English) GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, PETER DIXON, SAYING: "The last thing it wants to do is to see a rising euro further damage the competitiveness of the economy which is enjoying a nation's recovery. So it will I think constrain the ability of the ECB to act for the foreseeable future." No change in policy is expected at the ECB's meeting this week. But many in the markets are on high alert for what clues its president may give about future policy direction.