German industrial orders increase due to large-scale orders

By Maria Martinez

BERLIN, Sept 4 (Reuters) - German industrial orders rose more than expected in July, driven by sales of ships, railway rolling stock and aircraft.

Industrial orders rose by 2.5% from the previous month on a seasonally and calendar-adjusted basis, the national statistics office said on Friday.

A Reuters poll of analysts had pointed to an increase of 0.3%.

The increase was almost entirely attributable to growth in what the statistics office classifies as the manufacturing of other transport equipment, which includes aircraft, ships, trains and military vehicles. New orders rose by 126.4% in this sector, month-on-month.

An investment surge has been made possible by a special €500 billion infrastructure fund and an exemption from debt rules for defence spending approved last year.

Foreign orders dropped 2.1% in July, while domestic orders rose 9.1%. Excluding large-scale orders, new orders were 1.4% down from June.

"This means the underlying trend continues to move sideways at a low level," said Marco Wagner, senior economist at Commerzbank. "The German economy will therefore recover only moderately."

Despite higher prices due to the Iran conflict and uncertainty caused by U.S. tariffs, the German economy has shown resilience and grew by 0.3% in the second quarter, supported by a strong increase in exports.

Several economic institutes raised their forecasts for growth this year due to improving exports and stronger fiscal spending.

The less volatile three-month comparison showed that new orders from May to July were 2.9% higher than in the previous three months.

Provisional data were revised to show that new orders in June increased by 3.7% from May, against a preliminary 3.1% rise.

"The already high order books in various sectors of the economy are likely to contribute to a further stabilisation of the manufacturing sector,” said Deutsche Bank Research economist Marc Schattenberg.

(Reporting by Anastasiia Kozlova in Gdansk and Maria Martinez in Berlin; editing by Kirsti Knolle, Thomas Seythal and Kevin Liffey)