German industrial orders plunge as trade war fears weigh

By Michael Nienaber

BERLIN (Reuters) - Weak demand from domestic and euro zone clients led to a fourth straight monthly drop in German industrial orders in April, suggesting factories in Europe's largest economy will shift into a lower gear over coming months.

Contracts for German goods were down 2.5 percent from March after a downwardly revised drop of 1.1 percent the previous month, Thursday's Federal Statistics Office data showed.

The April reading significantly undershot a Reuters poll of analysts, who had predicted a 0.8 percent rise.

DIHK economist Sophia Krietenbrink said it might signal a loss of economic momentum despite the fact that order backlogs at German manufacturers were still high.

"Trade conflicts, in particular, are causing considerable uncertainty from outside," she said.

The decline was driven by a drop in domestic demand, though orders from clients in other euro zone countries also fell.

A sector breakdown of the figures showed demand for capital and consumer goods fell while demand for intermediate goods rose.

The release followed a string of strong economic data that included retail sales posting a bigger-than-expected jump in April, unemployment reaching a record low in May and business morale steadying despite the threat of a global trade war.

Germany's VDMA industry association said on Wednesday that engineering orders had jumped 12 percent in April compared to a year before, with surging domestic demand offsetting a drop in contracts from euro zone partners.

The German economy grew 0.3 percent on the quarter in the first three months of the year and is expected to pick up speed in the April-June period. For 2018 as a whole, the government forecasts 2.3 percent growth.

(Reporting by Michael Nienaber, editing by Thomas Escritt and John Stonestreet)