Rare respite for Germany as factory orders pick up
German factory orders beat expectations in June, official statistics showed today, providing a rare piece of good news for the country’s struggling economy.
Read more: Eurozone construction sector held back by Germany in July
New orders for manufacturers grew 2.5 per cent on the previous month, far exceeding the 0.5 per cent rise predicted by economists.
Year on year, factory orders fell by 3.6 per cent. The figure was better than the seven per cent fall economists had expected and a big improvement on the 8.4 per cent fall seen in May.
The figures will cheer the gloomy German manufacturing sector, which is widely expected to have contracted in the second quarter.
The US-China trade war, slowing global growth, Brexit and new car emissions tests in Germany have caused demand for German manufactured goods to slump.
The higher demand for German factories’ goods in June was driven by foreign orders, which increased by five per cent month on month, offsetting a one per cent fall in domestic orders.
Yet the price-adjusted turnover in the manufacturing sector in June was 0.1 per cent lower than in May.
“Despite a notable deceleration in the new orders slump,” said Barclays analyst Iaroslav Shelepko, “continued softness in demand amid waning backlogs of work is consistent with the manufacturing sector dragging GDP growth into negative territory in the second quarter”.
Moreover, he said, ongoing weakness in business sentiment and moderation in consumer confidence seen in July survey data “support downside risks to our flat growth forecast for the third quarter of 2019”.
Read more: Eurozone economy slows as German weakness continues
“Vulnerability of the German economy to external demand volatility,” Sheleopko said, “means that the most recent re-escalation of the US-China trade tensions might be sufficient to push the German economy into recession”.