Robotic arms manufactured by Kuka AG operate on a Volkswagen Passat saloon chassis on the automated welding production line inside the VW factory in Emden, Germany. (Photographer: Krisztian Bocsi/Bloomberg)

German Factory Orders Rebound on Euro-Area Demand for Investment

(Bloomberg) -- German factory orders rebounded in February, adding to a pile of work that keeps getting higher as companies face capacity constraints.

Orders, adjusted for seasonal swings and inflation, increased 0.3 percent after dropping a revised 3.5 percent in January, the Economy Ministry in Berlin said on Thursday. The typically volatile reading compares with a median estimate for a 1.5 percent increase in a Bloomberg survey. Demand was up 3.5 percent from the previous year.

German Factory Orders Rebound on Euro-Area Demand for Investment

Germany’s economy -- supported by strong domestic spending and booming global trade -- is in the midst of an upturn that has seen manufacturing at the pinnacle of the expansion. While activity in the sector is slightly weaker than at the end of last year, the country’s central bank says the economy probably maintained its momentum in the first quarter as companies work through their order books.

“The trend in manufacturing orders has weakened markedly,” the Economy Ministry said. “Despite the muted start to the year, orders should continue to grow. The global economy continues to be in an upswing, so that demand for German industrial goods should remain high.”

After growing 2.2 percent last year -- the most since 2011 -- gross domestic product is forecast to increase 2.5 percent in 2018. Bloomberg Economics estimates output is higher than can be sustained in the long term, with companies feeling the pinch of bottlenecks.

Thursday’s report showed that orders were driven by euro-area demand for investment goods. Excluding bulk orders, demand dropped 0.7 percent in February. Data due on Friday are likely to show industrial production also picked up.

©2018 Bloomberg L.P.