But no reason to celebrate?
Industry has a surprisingly large increase in orders
08/04/2023, 10:30 am
Instead of registering a renewed decline, the industry reports an increase in orders for June. But how sustainable is the growth? Both experts and the Ministry of Economic Affairs remain skeptical. The prospects remain subdued, as they say.
The ailing German industry is back with the second bang in a row: In June, your orders surprisingly increased by 7.0 percent compared to the previous month and thus more strongly than in three years. Large orders – especially from the aerospace industry – contributed to this, as the Federal Statistical Office announced. Nevertheless, the plus is unexpected, especially on this scale: economists surveyed by the Reuters news agency had expected a decline of 2.0 percent, after an unusually strong increase of 6.2 percent in May.
“Once again a big surprise, but on the positive side. Was the recession just a bad dream in the end?” asked LBBW economist Jens-Oliver Niklasch in view of this unexpectedly positive order development. “The situation is not as bleak as Germany’s economic situation is currently being portrayed as the sick man of Europe,” said Thomas Gitzel, chief economist at VP Bank.
Quarterly figures less rosy
However, leading indicators such as the IFO business climate suggest that Europe’s largest economy, which has not grown for three quarters in a row, is still in an economic downturn. Commerzbank chief economist Jörg Krämer therefore does not consider the flood of orders to be sustainable, especially since they are due to large orders. “The order trend is still pointing downwards,” said Kramer. “I still expect the German economy to contract in the second half of the year.”
The picture looks less good when looking at the entire second quarter: from April to June, orders increased by only 0.2 percent compared to the previous period. “The two significant increases in May and June compensated for the 10.9 percent drop in orders in March,” the statisticians explained.
Ministry dampens euphoria
The Federal Ministry of Economics therefore sees no reason to celebrate: “Nevertheless, the prospects for industrial activity remain subdued for the time being in view of the continuing gloomy business climate and the weak global economy”. After all: “Production is getting new fuel,” said the chief economist at Hauck Aufhäuser Lampe Privatbank AG, Alexander Krüger, on the increasing demand.
Bucking the trend, domestic orders in June fell 2.0 percent month-on-month, while foreign demand rose 13.5 percent, with that from the euro zone up 27.2 percent. The so-called other vehicle construction had a particularly positive influence with an increase of 89.2 percent. These include the construction of ships, rail vehicles, aircraft and spacecraft, and military vehicles. There was also strong growth in mechanical engineering at 5.1 percent, while the manufacturers of motor vehicles and motor vehicle parts reported a minus of 7.3 percent. “The situation remains difficult for car manufacturers,” said economist Gitzel.
The strong growth in orders is not yet reflected in sales: Real sales in the manufacturing sector in June were 1.6 percent lower than in the previous month. In May there was still an increase of 3.4 percent.