German Manufacturing Shows Signs of Life 

(Bloomberg) --

A rebound in German factory orders is adding to signs that the euro-area economy has passed the worst of its recent troubles.

Demand rose 1.3% in September, far exceeding estimates of a 0.1% gain. The first increase in three months was driven by a solid pickup in investment and consumer goods, with demand from outside the euro area providing a particular boost.

The euro rose after the report and traded at $1.1076 at 8:54 a.m. Frankfurt time.

The unexpectedly strong jump prompted cautious optimism at the Economy Ministry that German industry had a promising start to the fourth quarter. Paired with slowly brightening sentiment this “could signal a bottoming out of orders,” according to a statement.

Yet orders were still down 5.4% from the previous year, suggesting momentum will continue to be weak. Germany probably went into a technical recession during the last quarter, and the labor market started to deteriorate.

What Bloomberg's Economists Say

“Today's factory orders figures are consistent with our view that the dip will be shallow, though economic growth will remain weak going into 2020.”

--Jamie Rush. Read the GERMANY REACT

The data follow a report showing euro-zone manufacturing near its weakest in seven years, with job losses accelerating and order books declining. Even as the global economy shows signs of passing the trough, Germany has continued to struggle.

The government's council of economic advisers is set to slash its growth forecasts for this year and next when it presents Chancellor Angela Merkel with its annual report later on Wednesday.

Read more: Worst May Be Over for Global Economy Amid Signs of Stabilization

Policy makers at the European Central Bank have called on European governments to step in with fiscal support, arguing that monetary stimulus alone can't deliver the necessary boost. A call for additional spending also featured in President Mario Draghi's farewell speech last week, and his successor Christine Lagarde is likely to continue his efforts.

Yet governments have been reluctant, with Germany's administration indicating that the situation has to deteriorate before significant aid will be unlocked. Finance Minister Olaf Scholz has said the economic situation doesn't require a rushed fiscal response.

--With assistance from Kristian Siedenburg and Harumi Ichikura.

To contact the reporter on this story: Yuko Takeo in Frankfurt at ytakeo2@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow

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