German factory orders plunge as debt crisis deepens

German factory orders plunged in September following a dramatic 12.1-per-cent monthly contraction in demand from the country's key eurozone partners, data released Friday showed, according to dpa. The Ministry of Economics in Berlin said new industrial orders plummeted by a bigger-than-forecast 4.3 per cent in September from August to record their third consecutive monthly fall. Analysts had predicted a small 0.1-per-cent fall in September. "The financial turmoil and the economic slowdown in other eurozone countries have obviously spoiled the appetite for goods 'made in Germany'," said ING Bank economist Carsten Brzeski. "The German industry has finally caught the crisis virus." The September decline meant that factory orders have slumped by 3.6 per cent during the third quarter from the previous quarter Orders sunk 1.4 per cent in August. Underlying the scale of the slowdown underway across the 17-member eurozone, a key survey released Friday showed private sector activity in the currency bloc contracting at its fastest pace in 28 months in October. The London-based economic research group Markit said its composite purchasing managers' index (PMI) for the eurozone fell to 46.5 last month from 49.1 in September as the debt crisis undercut the economic mood across the region. This is lower than Markit's preliminary estimate of 47.2. A reading below 50 indicates contraction in economic activity. "The final PMI was even weaker than the earlier flash estimate, and suggests that the euro area contracted at a worrying pace at the start of the final quarter," said Markit chief economist Chris Williamson. Year on year, orders slowed to post a modest gain of 2.4 per cent in September from growing by 4 per cent in August. Releasing the data, the ministry pointed to the low demand for major items such as ships, railway equipment and aircraft as well as the calendar effects of the summer holiday season as contributing to the fall in orders. But it went on to say: "Companies currently appear reluctant to act." The ministry added that it expects industrial production to slow during the fourth quarter. The release of the latest order book data followed the surprise announcement by the European Central Bank on Thursday that it was cutting borrowing costs by 25 basis points to 1.25 per cent. This came with a warning from the ECB's new president, Mario Draghi, that the eurozone faced a mild recession in the runup to the end of the year. While total foreign orders fell by 5.4 per cent month-on-month in September, domestic orders dropped by 3 per cent. The September drop in orders from Germany's main trading partners in the eurozone followed a 5 per cent contraction in August. Orders from non-eurozone states slipped by 0.3 per cent. This includes demand from the 10 members of the European Union that have not joined the European Union along with major world economies such as the US, China and Japan.