German orders fall on weak demand

BERLIN: Manufacturing sector keeps Germany on path to recovery. – AFP

FRANKFURT: German industrial orders fell sharply in May, hit by weak demand from abroad as the pandemic continued to pummel Europe’s top economy, official data showed yesterday. Orders were down by 3.7 percent, according to the federal statistics office Destatis, dashing the hopes of analysts polled by Factset who had pencilled in a rise of 0.8 percent compared to April.

However, a year-on-year comparison showed a whopping 54.3 percent increase compared to May 2020, when the economy came to a screeching halt during the first wave of the global pandemic. International orders in May sank particularly sharply, by 2.3 percent from eurozone countries and 9.3 percent from the rest of the world according to month-on-month data.

Industrial orders are closely watched as a key indicator of future economic activity, especially in manufacturing powerhouse Germany. Germany’s economy shrank in the first quarter as restrictions were imposed to counter a winter surge in COVID-19 cases. But ING analyst Carsten Brzeski suggested the disappointing May industrial orders data should be taken with a “pinch of salt”. He noted that “ongoing supply chain disruptions, delivery delays and lack of materials and intermediate goods” due to the pandemic have “blurred the traditional link between industrial orders and production”.

“Consequently, the industrial rebound could be a bit more erratic than previously anticipated,” he said. “Order books are more than richly filled and reducing backlogs is a bigger problem for German companies than acquiring new orders.” Last week German business confidence rose to a near three-year high in June, buoyed by reopenings and falling coronavirus infection rates, according to the Munich-based Ifo institute’s monthly confidence barometer. But yesterday the ZEW institute’s monthly barometer measuring economic expectations showed an unexpected slide in investor sentiment.

Concern about the rapid spread of coronavirus variants and material shortages in production weighed on the notoriously volatile index, sending it plunging 16.5 points month on month to 63.3 for July. Analysts surveyed by Factset had been counting on a much higher score of 75.1 points. ZEW President Achim Wambach noted that despite the fall of the indicator it was “still at a very high level”. “The financial market experts therefore expect the overall economic situation to be extraordinarily positive in the coming six months,” he said. – AFP


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