Germany factory orders slump 11.7% at start of third quarter

GERMAN factory orders plummeted in July, a sign that the woes of Europe’s biggest economy continued into the third quarter.

Demand decreased by 11.7 per cent from June, far worse than the 4.3 per cent drop expected by economists in a Bloomberg survey. That decline was due to major orders, without which the gauge would have increased by 0.3 per cent.

The drop in what is a volatile series did follow three months of gains.

After enduring a winter recession brought on by Russia’s war in Ukraine, German output failed to expand in the second quarter and will probably also stall in the third.

With the final three months of 2023 likely to bring growth of only 0.1 per cent, some have revived the “sick man of Europe” tag assigned to Germany in the aftermath of its reunification in 1990.

Industry has been weighing most, due to poor demand in China, the world’s No 2 economy, which is itself losing momentum.

German manufacturing data due for release on Thursday (Sep 7) may also show ongoing weakness, with the median economist estimate predicting a third consecutive monthly contraction.

Asked about the “sick man” moniker, Bundesbank president Joachim Nagel acknowledged that the current situation is not great.

“It’s true that we slipped into a technical recession in the winter half-year and that economic development since then hasn’t been satisfactory,” he told the newspaper Handelsblatt in an interview. “But we expect the picture to brighten again.”

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He pointed to the strength of the labour market, saying that it is in a much better condition than in the 1990s. That makes comparisons with that period flawed.

“Germany isn’t the sick man of Europe,” he said, adding: “I think that’s a misdiagnosis” and “we should be more self-confident”. BLOOMBERG