Unexpected drop in factory orders in Germany

The German Ministry of Economy and Climate Protection has announced provisional data on factory orders for April.

Consequently, orders for domestically manufactured goods decreased 0.4 percent in April compared to the previous month.

Factory orders fell 10.9 percent in March, the biggest drop since April 2020. The market expectation was for a 3 percent monthly increase in April after the decline in March.

Factory orders were also down 9.9 percent compared to April 2022.

In Germany, there was a monthly decline of 1.6 percent in domestic orders and 1.8 percent in foreign orders in April.

AFFECTED BY THE WEAK WORLD ECONOMY

There were also large differences between sectors for orders received in that period. While there were decreases in orders for the manufacture of machinery-equipment and miscellaneous vehicles such as ships, trains and airplanes, there was an increase in the sectors of manufacture of electrical equipment and motor land vehicles.

In the statement of the German Ministry of Economy and Climate Protection, which notes that there will be a 1.4 percent increase in factory orders in April, if large orders are excluded, “The export-oriented German economy is particularly important for orders from the still weak world economy and the Eurozone, negatively affected by the decline.

In the ministry’s statement, which said that domestic demand is relatively stable, it was noted that weak factory orders have not yet accelerated the growth of industrial production.

‘THINGS ARE NOT SMOOTH IN THE INDUSTRY’

In his assessment on the matter, Commerzbank chief economist Jörg Kramer stated that despite the drop in March, incoming orders did not pick up in April, contrary to expectations: “This is a bad sign. The technical recession in the middle of winter was not accidental. With interest rates rising around the world, there are many signs that the German economy will contract again in the second half of the year.” saying.

Hauck Aufhauser Lampe Privatbank Chief Economist Alexander Krüger described the data on factory orders as a major disappointment, saying: “Things are not easy in the industry… The future of the industry will remain challenging due to climate policy in this country. he performed the assessment of it.

The German economy had technically entered a recession, contracting 0.3 percent in the first quarter of this year due to the impact of unusually high inflation and rising interest rates on consumer spending.

The economy contracted 0.5 percent in the last quarter of last year.

THE STAGE IN DEMAND WAS EFFECTIVE

Although the bottlenecks that arose during the Covid-19 epidemic have eased, the country’s economy is negatively affected by the stagnation of demand due to the rise in interest rates, the decrease in confidence in the economy and the decrease in consumer purchasing power. in an environment of unusually high inflation.

The German government expects 0.4 percent growth in the economy this year. Leading German economic institutes predict the country’s economy will grow 0.3 percent this year.

The Association of German Chambers of Industry and Commerce (DIHK) lowered its real growth forecast for German exports in 2023 from 2.5% to 1% on May 3, despite better functioning supply chains after the COVID-19 outbreak.

The DIHK cited high inflation, rising interest rates and rising protectionism in world trade as the cause. (AA)