RTTNews - Germany's better-than-expected growth in factory orders was the biggest since June 2007. The report on factory orders released by the Federal Ministry of Economics and Technology on Tuesday points towards a possible recovery in the recession hit economy.

Factory orders recorded a monthly growth of 4.4% in May, much larger than the expected increase of 0.5% and April's 0.1% rise. The 4.4% growth rate was the largest since June 2007.

In the two-month comparison, orders increased 4.2% due to strong foreign demand. Domestic and foreign orders climbed 3.9% and 4.5%, respectively.

The prospects of a broader stabilization of industrial production are thus strengthened, the ministry said.

Year-on-year, orders plummeted 29.4% in May versus a 37.1% fall in April. Domestic orders were down 25%, while foreign orders plunged 33%.

All the three main groups of the industry showed declines, but it was slower than their respective previous month levels. Decreases in intermediate and capital goods orders were 27.4% and 32.6%, respectively. Demand for consumer goods recorded an annual 14.8% drop.

Ralph Solveen, Commerzbank analyst pointed out that there are growing signs that the lowest point would have been reached at mid-year, followed by a recovery in the second half. The analyst sees the slide in industrial production coming to a halt, though the trend for May production indicates a slight decline.

As of mid-year at the latest, output and GDP should start to rise again. Following renewed contraction in the second quarter, positive results should develop in the third quarter. Commerzbank analyst finds visible signs of recovery likely to be a comparatively weak one as the aftermath of the financial crisis would be felt for sometime to come. Solveen said, This does not, of course, preclude stronger performance in one quarter or another.

The Federal Ministry of Economics and Technology is set to release a report on industrial production on July 8. Economists are looking for a monthly 0.5% growth in May.

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