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UPDATE 2-German industry orders rise despite global trade friction

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(Adds Scholz)

BERLIN, Dec 6 (Reuters) - Strong demand from abroad drove an unexpected rise in German industrial orders in October, suggesting that exports may still support Europe’s largest economy despite broader global trade friction.

Contracts for ‘Made in Germany’ goods rose by 0.3 percent, data from the Statistics Office showed on Thursday, as strong demand from the euro zone offset a fall in domestic orders.

It was the third consecutive monthly increase and compared with a consensus forecast for a fall of 0.4 percent. September’s figure was downwardly revised to a modest rise of 0.1 percent.

The Economy Ministry said a slowdown in new car registrations stemming from the introduction of stricter pollution standards, known as WLTP, was still weighing on orders. Bottlenecks were gradually clearing up, it added.

The effect of the WLTP standard on new registrations was reflected in a 3.2 percent contraction in domestic demand. That compared with a 2.9 percent rise in foreign orders, including a 7.3 percent increase in new orders from Germany’s euro zone partners, the data showed.

The German economy, in its ninth straight year of expansion, has been looking to domestic consumption and increased state spending for growth as exporters have been caught up in trade disputes on goods tariffs that the United States is trying to resolve with both China and the European Union.

Finance Minister Olaf Scholz told a news conference in Berlin that he was hopeful the U.S. government and the European Commission would reach a deal to remove mutual tariffs on goods and permanently eliminate President Donald Trump’s threat to impose tariffs on cars made in Europe.

“We have many risks which could compromise our positive (growth) diagnosis,” Scholz said.

“Possible trade conflicts could escalate, but a hoped-for de-escalation could have the opposite effect. Some messages we’re hearing tell us it’s going in the right direction,” he said of talks about tariffs the United States is holding with major trade partners.

Thomas Gitzel of VP Bank said in a note that orders numbers this year have been weak on the whole and this is a reflection of the effects that tariffs are having on German manufacturers.

“The headline figure is pleasing. Dark clouds are building up on the economic horizon, but today’s numbers provide a blue patch,” said Gitzel. “The crisis has been postponed.” (Writing by Joseph Nasr; Editing by Toby Chopra and Hugh Lawson)

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