German industrial orders jump in May, but backdrop risky

By Michael Nienaber

BERLIN (Reuters) - German industrial orders bounced back in May with a stronger-than-expected jump after four consecutive monthly drops, data showed on Thursday, as demand from domestic customers and the rest of the euro zone picked up.

The Federal Statistics Office said orders rose 2.6 percent after an upwardly revised drop of 1.6 percent the previous month. The latest reading beat a Reuters poll of analysts, who had predicted a 1.1 percent rise.

"The upswing is alive, but it has passed its peak," Bankhaus Lampe economist Alexander Krueger said, pointing to external risks such as protectionist moves by U.S. President Donald Trump.

The Economy Ministry said industrial output was likely to rise moderately in coming months.

The rise in May was mainly driven by demand from other euro zone countries and domestic clients. A breakdown of the figures showed that orders for capital goods and consumer goods jumped the most.

The ministry said the four monthly drops from January to April were a consequence of a strong jump in orders in the second half of 2017.

"The weakness of the global economy in the first quarter and uncertainty about trade policy also played a role," it said.

"(The order) backlog is still very high and business morale is still better than the long-term average despite a recent deterioration."

Thomas Gitzel of VP Bank said that the orders figures suggested that the German economy's relatively weak performance in the first quarter was just a blip.

"Provided the trade dispute does not escalate further, German GDP will regain some momentum in the second half of the year," Gitzel said.

The International Monetary Fund on Thursday cut its 2018 forecast for German GDP growth to 2.2 percent, saying rising protectionism and the threat of a hard Brexit had exposed Europe's biggest economy to significant short-term risks.

(editing by John Stonestreet)