German factory orders unexpectedly slump as recovery falters
Private sector activity and investor confidence in June are also undershooting expectations
GERMAN factory orders unexpectedly fell in May, marking the latest setback to the recovery in Europe’s largest economy.
Factory demand in Germany defied analyst estimates of a 0.5 per cent increase. Data on Thursday (Jul 4) showed that orders dropped 1.6 per cent from April, extending the slump to five months.
Orders were down 8.6 per cent on the year, highlighting the persistent struggles of German manufacturers. The decline would have been even worse without above-average bulk orders, the release said.
There was also a marked drop in demand outside the eurozone.
“Together with the recent deterioration in business expectations in the manufacturing sector, the continuing decline in orders points to rather subdued momentum in industry in the coming months,” Germany’s Economy Ministry said.
“Orders are only likely to stabilise once global trade continues to recover and demand for industrial products gradually picks up,” the ministry added.
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The report adds to some less-than-positive figures of late on Germany’s rebound. In June, private sector activity, as well as investor confidence, rose less than expected, as measured by the ZEW institute.
Still, the Bundesbank said last month that despite headwinds weighing on growth, there are “increasing bright spots”. The bank estimates that gross domestic product advanced “slightly” in the second quarter.
The latter half of the year is expected to be stronger as rising wages feed higher spending by households. Slower inflation will also help – gains in consumer price moderated to 2.5 per cent in June.
A moderation across the eurozone is boosting the chances of more interest rate cuts by the European Central Bank this year.
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