All about business

German manufacturing orders fell more than economists forecast in February, extending their worst decline on record as the global recession eroded demand for exports and damped investment at home.

Orders, adjusted for seasonal swings and inflation, fell 3.5 percent from January, the sixth consecutive drop, the Economy Ministry in Berlin said today. Economists expected a 2.1 percent decline, the median of 30 forecasts in a Bloomberg survey showed. From a year earlier, orders plunged a record 38.2 percent.

Companies from carmaker Volkswagen AG to software maker SAP AG have reduced output and cut jobs as the global financial crisis curbs exports. The German government plans to spend about 82 billion euros ($109 billion) to stimulate growth, including tax breaks and investment in infrastructure.

“The outlook for orders in the immediate future remains bleak,” said Simon Junker, an economist at Commerzbank AG in Frankfurt, who expects the German economy to shrink as much as 7 percent this year. “The government’s stimulus measures and interest-rate cuts will show some effect, but it’ll take time for demand to increase.”

Domestic factory orders slumped 5.7 percent in the month, today’s report showed. Export sales fell 1.3 percent, with euro- region orders dropping 3.7 percent.

Deep Recession

German exports dropped 0.7 percent in February, the fifth decline in as many months, the Federal Statistics Office said today. Imports fell 4.2 percent in February from the previous month.

The German economy, Europe’s largest, will shrink 5 instant cash advance.3 percent this year, the Organization for Economic Cooperation and Development said last week. That’s more than six times as much as much as previously forecast. The OECD expects the euro-region economy to shrink 4.1 percent.

Group of 20 countries have announced stimulus packages worth more than 2 trillion dollars to boost investment and consumption.

“It is obvious that Germany will benefit more from foreign stimulus packages than from its own,” said Sylvain Broyer, an economist at Natixis in Frankfurt. “Any recovery in the coming quarters will be tied to these packages, but their effect will evaporate at the end of the year.”

Factory orders from outside the 16-nation euro region rose 0.5 percent in February from January, the ministry said. Export orders for investment goods rose 2 percent, driven mainly by stronger demand from within the euro area.

The European Central Bank has cut its benchmark interest rate by 3 percentage points to a record low of 1.25 percent since early October and policy makers have indicated they’ll cut the rate further to fight the region’s worst recession since World War II.

Governing Council member George Provopoulos said in a Bloomberg interview published yesterday he wouldn’t exclude taking the key rate below 1 percent if the economic environment deteriorates further.

Source