German manufacturing orders rose by 3.2 percent on the month in June due to strong foreign demand, surpassing expectations and sending the euro higher.

The rise, which compared with a consensus forecast for a gain of 1.5 percent, was aided by big orders for planes and trains. Without these exceptional items, economists said orders would have fallen slightly.

June's orders increase rounded out a strengthening in demand over the second quarter, when orders rose by 7.7 percent from the first three months of the year, the Economy Ministry said. Economists expected the rise in demand to slow.

"The momentum is very strong," said Dirk Schumacher at Goldman Sachs. "The tempo is so fast however that it clearly can't continue. The economy will cool slightly, although we don't expect it to stagnate."

European Central Bank President Jean-Claude Trichet, speaking after the ECB left rates unchanged, said the second and third quarters would likely be stronger than expected in the euro zone but that the second semester would be less buoyant.

Export Boom
The rise in orders added to evidence that an export-driven recovery is helping Germany to grow faster than expected, leaving behind poorer euro zone countries hit by a sovereign debt crisis that they are still battling to overcome.

"German manufacturing is downright booming," said DekaBank economist Andreas Scheuerle. "It is the second best quarterly result in orders in unified Germany's history -- the only bigger plus was just after the crisis."

A purchasing managers' survey released on Wednesday showed strong growth in the services sector in Germany but weakness in southern Europe. German business morale also leapt last month to its highest level in 3 years.

Orders from the euro zone rose 11.3 percent in June.

Unless German demand for goods and services from other euro zone states rises too, Germany could grow at its peers' expense. German retail sales fell in June, showing consumers' reluctance to spend despite the recovery.

Many German companies are profiting from growth in emerging markets. Carmaker BMW posted its best ever quarterly pretax profit, lifted partly by surging sales of luxury cars in China.

The positive news has led Economy Minister Rainer Bruederle to raise his sights for 2010 economic growth to above 2 percent. The government's last official forecast was for gross domestic product (GDP) to grow 1.4 percent this year.

"Overall companies' orders situation improved markedly in the second quarter," the ministry said in a statement. "This points to a continuation of the recovery process in manufacturing." (Reuters)