German Factory Orders Dip But Economy Continues Upward Trend

(Bloomberg) -- German factory orders fell in November as demand for investment goods dropped, though the Economy Ministry said the trend remains upward.

Orders, adjusted for seasonal swings and inflation, slid 0.4 percent after a revised 0.7 percent gain in October, the ministry said on Monday. While the decrease snapped three month of gains, the number is typically volatile and orders were up 8.7 percent from a year earlier.

“Overall, orders in the second half of 2017 developed extremely dynamically. This lays the foundation for a strong start to the year in industry,” the Economy Ministry said in a statement. “In November, fluctuations in bulk orders were the main reason for the negative result.”

Monday's report showed that domestic factory orders fell 0.4 percent in November and those from nations outside the euro zone slid 1.2 percent, while orders from the rest of the currency bloc increased 0.7 percent. The ministry said that despite the most-recent drop in investment orders, the category continues to drive growth in demand.

Germany is in the midst of an economic boom, with exporters benefiting from improving global trade and record-low unemployment buttressing domestic spending. Manufacturing has been leading the expansion in output, with private-sector activity last month hitting the highest level in two decades.

Yet at the same time, and in common with the euro area as a whole, price pressures have failed to build at a similar pace and wages have been slow to rise.

Read more: Euro-Area Inflation Slowdown Undermines Hawkish Calls to End QE

Bundesbank President Jens Weidmann has said he expects the state of affairs for pay to change in Germany. Tighter capacity utilization and regional labor-market squeezes will lead to “somewhat higher wage pressure,” he told reporters last month.

Germany's IG Metall union will resume talks with employers this week as it pushes for a 6 percent pay increase and greater flexibility in working hours for 3.9 million metalworkers and engineers.

Weak euro-zone inflation is the key reason why the European Central Bank is pushing ahead with monetary stimulus. Officials have pledged to keep buying bonds until at least September, and won't start to raise interest rates until well after purchases stop.

--With assistance from Lukas Strobl Alexander Kell and Carolynn Look

To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Paul Gordon, Kevin Costelloe

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