German July industry orders jump on defence boost

German manufacturing orders lifted higher than expectations in July, bolstered by defence spending, data from the Economy Ministry showed on Monday.

The seasonally adjusted 3.5 percent rise compared with a Reuters poll forecast for a 2.0 percent rise and added to signs the industrial sector is supporting economic recovery.

''For the near term, the outlook for the German economy looks bright as it can still benefit from the best of both worlds: stimulus-driven private consumption and blossoming out industrial activity,'' said Carsten Brzeski from ING Financial Markets.

He said the data raised the prospect that manufacturing ''could take over the baton'' in the second half of the year from a subsidy scheme to trade in old cars, which boosted auto sales sharply but has now come to an end.

The July rise was led by a 17.2 percent increase in domestic orders for investment goods. A spokesman for the Federal Statistics Office said this was in part thanks to a big order for military vehicles in July.

On July 6, Germany's Rheinmetall announced it had clinched a 3.1 billion euro ($4.35 billion) contract to supply the German army with 405 Puma armoured vehicles, which the company makes along with Krauss-Maffei Wegmann.

The German orders increase was the fifth in a row according to revised Bundesbank data published after the ministry issued the figures. Prior data had pointed to a third straight rise.

Germany's manufacturing sector has been suffering a slump in step with the global economic downturn, with orders falling steadily from late 2007 until spring of this year.

Foreign orders fell 2.3 percent in July, the data showed. Demand for intermediate goods rose 5.2 percent, while orders for investment goods rose 3.2 percent, the ministry said.

Data from the Markit purchasing managers' index (PMI) released last week showed Germany's overall industrial sector came close to returning to growth in August on a jump in output and new orders.