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German industrial orders up but situation still critical, say analysts

(Reuters) -German industrial orders rose significantly more than expected in May due to large-scale orders of ships, spacecraft and military vehicles, but analysts said that beyond those exceptional purchases the sector remains under serious pressure.

Incoming orders rose by 6.4% on the previous month on a seasonally and calendar adjusted basis, the federal statistics office said on Thursday. A Reuters poll of analysts had pointed to a 1.2% increase.

There was a 137.1% increase in the manufacture of other transport equipment, which includes ships, railway rolling stock, air and spacecraft, as well as military vehicles.

The sharp increase in this sector, driving up the main index, was due to large-scale orders, the statistics office said.

If this highly volatile component is factored out, the increase in the main figure is only 2.4%, instead of 6.4%, Commerzbank (ETR:CBKG)'s senior economist Ralph Solveen said.

The figure for April was revised to a 0.2% increase instead of a 0.4% drop on the month.

Despite the positive data in May and April, the three-month on three-month comparison showed that new orders were 6.1% lower in the period from March to May than in the previous three months, indicating a slowdown in demand.

"Although the May figure has brightened the picture somewhat, the trend continues to point clearly downward," Solveen said.

Orders are down 4.3% compared with May 2022.

"New orders are the lifeblood of the export-heavy German economy," said Thomas Gitzel, chief economist at VP Bank Group, adding that the situation remains critical.

Since hardly any other country in Europe is as dependent on the manufacturing sector, it is not surprising that Germany is at the bottom of growth rankings, said Gitzel, who expects the economy to contract in 2023 as a whole.

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