(OFFICIAL)-German industry orders fall-CORRECTED-UPDATE 1

Trade the News

Wednesday September 08, 2010 07:35:11 PM GMT

(Corrects month in fourth paragraph after ministry says was deepest fall since February 2009, not March)

* Orders fall 2.2 percent vs expected 0.5 percent rise

* Lower than average big orders, foreign orders weigh

* Trend in demand for industrial products still up

(Adds details, background, market reaction)

By Annika Breidthardt

BERLIN, Sept 7 (Reuters) - German manufacturing orders unexpectedly fell in July at their steepest rate in more than a year, weighed down by weaker demand from abroad and a below-average volume of big orders.

The data sent the euro to a session low against the dollar and Bund futures to a session high.

But the Economy Ministry said on Tuesday the trend in demand for industrial goods continued to point upwards.

Orders fell 2.2 percent on the month in July, the deepest fall since February 2009, according to the Economy Ministry.

That confounded expectations in a Reuters poll of 42 economists for a 0.5 percent rise, with projections ranging from -1.7 percent to +3.8 percent.

"The overall result was dampened significantly by a below-average volume of big orders," the Economy Ministry said in a statement. "The trend in demand for industrial products, however, continues to point upwards."

Orders from abroad fell 3.7 percent, steeper than the 0.3 percent fall in domestic orders. Orders from the euro zone, where many countries have launched strict austerity measures to tackle a sovereign debt crisis, fell 6.1 percent.

June's rise in orders, boosted by big foreign orders for planes and trains, was revised up to 3.6 percent from a previously reported 3.2 percent increase.

"This is rather a slight setback. It shows that we can't keep up the dynamics of past months. It's part of the economic slowdown that important trade partners are facing, from the United States to Asia," said Stefan Schilbe of HSBC Trinkaus.

An export-driven recovery has helped Europe's largest economy rebound faster than expected from its deepest post-war recession.

The economy expanded at the strongest rate since reunification in the second quarter, more than twice as fast as the overall euro zone, but economists expect the pickup to slow in the second half, not least due to slowing growth elsewhere.

"The decline of consumer goods orders is disappointing. But we will see in the next months that private consumption will move upwards because the general conditions for higher consumer spending are right, part of this especially due to decreasing unemployment," Schilbe said.

Orders for consumer goods fell 1.0 percent on the month, with a 2.6 percent drop from abroad, but were up 0.9 percent domestically.

German private consumption has turned up and actively contributed to the strong second-quarter output increase, boosting expectations that German consumers may finally be coming out of their shell. (Additional reporting by Christian Ruettger and Erik Kirschbaum; Editing by Hugh Lawson)

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