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German Factory Orders Recover On Non-Eurozone Demand

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Germany's factory orders rebounded in June driven by strong demand from non-euro area economies, data from Destatis showed Tuesday.

Factory orders grew by a more-than-expected 2.5 percent on a monthly basis in June, offsetting a revised 2 percent drop in May. The expected pace of growth was 0.5 percent.

June's increase was driven by a 5 percent rise in foreign orders. New orders from the euro area were down 0.6 percent, while new orders from other countries grew 8.6 percent. On the other hand, domestic orders decreased 1 percent in June.

Excluding big ticket orders, overall orders received in June was down 0.4 percent from the previous month.

On a yearly basis, factory orders declined 3.6 percent in June, but much slower than the 8.4 percent decrease seen in May and the expected fall of 5.3 percent.

In the second quarter, overall new orders fell 1 percent sequentially, which was slower than the 4.2 percent decline logged in the first quarter.

Due to the significant decline in the previous months, orders still point to a further decline in production, and the very bad mood of manufacturing corporates gives reason to fear that the increase in orders in June was only a breathing space in a sustained downward trend, Ralph Solveen, deputy head of economic research at Commerzbank, said.

Solveen expects manufacturing to continue to slowdown the German economy in the third quarter. This increases the risk that the economy will shrink again in the third quarter.

Further, data showed that manufacturing turnover decreased 0.1 percent on month in June after easing 1.3 percent in May.

Destatis is scheduled to issue industrial production data on August 7. Economists forecast output to fall 0.5 percent on month in June, reversing a 0.3 percent rise in May.

Elsewhere, the Purchasing Managers' survey showed that Germany's construction sector contracted for the first time in nine months in July. The PMI fell to 49.5 in July from 50.0 in June.

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