Manufacturers' new orders in Germany increased 2.4% in June, following a similar 2.3% gain in May. Forecasters had expected that after the good May rise, orders would be flat in June, so this was a pleasant surprise. This month, it was orders from domestic German customers that gave the push, while in May, foreign customers' orders had the lead. As seen in the table below, foreign orders have been particularly strong over the past year, although domestic orders have shown moderate growth as well.

Further encouragement to the German outlook came from the fact that capital goods orders had the greatest strength. These rose 4.2% in the month and stand 12.9% above a year ago. Among individual industries, the year-on-year pattern highlights this strength in electrical equipment and transport equipment. Consumer orders are also rising, but less vigorously.

Press commentary today highlighted the decline in the euro so far this year as a factor supporting both domestic and foreign orders in the German factory sector. But the second graph doesn't seem to bear this out. Foreign orders turned higher before the currency value began to fall. Possibly the uptrend would have faded without the boost from a cheaper euro, but the currency value was not the initial force in the upturn. Rather, we would surmise that for both domestic and foreign orders the recent increases have come as the post-Y2K recession ran its course. Perhaps this performance will work its way into the consumer sector and help to improve the sluggish retail trade trends we discussed here yesterday.