BONN, Oct 6: German industrial orders data announced on Monday clocked up a surprising third successive gain in August, but analysts said the data were unlikely to trigger a knee-jerk interest rate rise by the Bundesbank.

The economics ministry said that industrial orders rose a provisional, seasonally adjusted 1.7 per cent from July, when they increased one per cent. The rise contrasts sharply with a 3.2 per cent decline in industrial output in August.

The picture painted by the orders data of a resurgent economy reinforces the mainstream view that the Bundesbank will have to tighten monetary policy eventually, perhaps even next month, but analysts said it has no reason to do so immediately.

The data amplify the weekend warning by Bundesbank council member Edgar Meister, who repeated that German inflation was going in the wrong direction, and added that the low interest rate phase in the country appeared to be over. Bundesbank president Hans Tietmeyer also said last week that the central bank would not allow the markets or individual economic data to dictate its actions.

The rise in industrial orders contrasted with average expectations of a drop of 0.5 per cent among economists polled by Reuters. "This really is a surprise, but it confirms the trend that the upturn stems mainly from exports and mainly from West Germany," said Frank Schroeder at Trinkaus & Burkhardt. "I see no pressure on the Bundesbank to react this week, but we see a rise in German interest rates at some point in coordination with other European central banks. We see the repo at 3.50 per cent at the end of 1997," he said. The repo rate now stands at 3.0 per cent.

Economist Eckhard Schulte at the Industrial Bank of Japan in Frankfurt agreed. "I would not put too much weight on the data alone, but over the last few months, it shows that the manufacturing sector is strong," he said.

"But there is no reason for the markets to be worried. This data does not justify an increase in the repo rate."

The German bond and money markets were unfazed by the strong data. December Bund futures were down 0.34 on the day at 103.58, but the fall came before the orders data were released.

The news had little impact on long-dated German bonds but shorter maturities were slightly lower. "This is bound to affect shorter maturities because it raises fears of an interest rate rise," one bond dealer said. The national increase in orders masked a fall in the formerly communist east, and very strong exports more than made up for a decline in domestic orders.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.