Germany: Roller coaster ride of orders – Commerzbank

Dr Ralph Solveen, Senior Economist at Commerzbank, offers a brief review of Wednesday's release of German Factory Orders, which contracted for the first time in three months and plunged by 11.7% in July.

Key Quotes:

“The rollercoaster ride in German industrial order intake continues. After rising strongly in May and June, more than offsetting the significant decline in March, they literally collapsed again in July with a drop of 11.7%. However, the sharp movements in the past three months are primarily attributable to a varying number of big ticket orders. Excluding these, new orders have hardly changed on balance in the past four months. For July, this "core variable" even showed a slight increase of 0.3%.”

“However, it would probably be premature to interpret this recent sideways movement in core orders as the start of a stabilization in demand. In the surveys for the PMI and the Ifo Business Climate, companies have simply assessed current demand too negatively of late for this to be the case. In addition, the central banks' interest rate hikes are unlikely to have had already their full impact on global demand for German goods. We therefore expect the trend in new orders to point downwards again in the coming months. This will increasingly feed through to production, with the result that industry is likely to be a major contributor to the German economy contracting again in the second half of the year.”