Published On: Mon, Jun 6th, 2016

German Industry Orders Fall More Than Forecast In April

German Industry

Foreign orders outside of the euro zone were the biggest contributor to the drop.

German factory orders for April declined by 2 per cent during the month, a drop that was higher than expected with expectations of a 0.5 per cent contraction, making April the biggest monthly fall in nine months.

New orders in manufacturing decreased by 2 per cent in April compared to the previous month’s recording the Federal Statistical Office said on Monday. March’s figures were also revised to an increase of 2.6 per cent over February, compared to the initially reported 1.9 per cent rise.

April’s decrease was due to a 4.3 per cent drop in foreign orders, mostly coming from outside of the euro zone. Demand from outside the euro zone fell by 8.3 per cent versus the previous month’s records, a sign that the economic slowdown in emerging markets is leaving a mark on Europe’s biggest economy during this year’s second quarter.

In the same monht last year, the index also turned negative, decreasing by 0.5 per cent against the forecast of 0.6 per cent expansion.

Carsten Brzeski, chief economist at ING, said that the weakening foreign demand “illustrates weakness in China. Some might even see a Brexit element in this decline.”

Meanwhile, domestic demand increased by 1.3 per cent while orders coming from euro zone countries rose by 2.5 per cent. The data suggests that Germany will have to keep relying on private consumption rather than trade to drive growth as the global demand holds back appetite for its exports.

It may take time for the region’s largest economy to recover according to Brzeski:

“Looking ahead, there is little reason to see a quick brightening of the outlook for German industry. Instead, the outlook will remain mixed. Companies are still reducing their inventories to satisfy new orders. At the same time, however, a slight increase in capacity utilization—though still only round historical averages—and backlogs of work should provide enough support for the industry not to fall off a cliff. In sum, industrial muddling through in Germany looks set to continue.”

Receive News & Ratings Via Email

Enter your email address below to get the latest news and analysts' ratings for your stocks with MarketBeat's FREE daily email newsletter: