German factory orders unexpectedly posted their biggest rise in two years in December, official data showed Thursday, fuelling hopes that a turnaround is taking hold in Europe's struggling top economy. New orders, a key indicator of future business activity, jumped 7.8% from a month earlier, according to preliminary figures from statistics agency Destatis, after a rise of 5.7% in November.
Analysts surveyed by financial data firm FactSet had expected an increase of just 1% in December. The signs of life in the long depressed manufacturing sector will come as a relief to Chancellor Friedrich Merz, who has faced mounting criticism that his efforts to revive the economy are moving too slowly. LBBW bank economist Jens-Oliver Niklasch said a "trend reversal" looked to be underway.
"For the first time in a long time, we have reason to be confident," he said. Top-selling tabloid Bild celebrated the news with an article headlined "Industry is booming!" Large-scale orders drove the increase, though even when these were excluded, the figure was still up 0.9% from the previous month. Orders for metal products climbed by over 30%, and there was also significant growth in orders of machinery and equipment, computer and electronic products.
But there were falls in orders in the struggling automotive industry and in the category of other transport equipment, which includes aircraft, ships, trains and military vehicles. Foreign orders were up 5.6% in December while domestic orders rose over 10%, according to Destatis. The German economy has been mired in a long decline due to a manufacturing slump, high energy costs, weak demand in key markets such as China and US tariffs.
But Merz has launched a public spending campaign in the areas of defence and infrastructure, and the government is forecasting the economy will pick up speed this year with 1% growth.
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