German factory orders slump as US trade talks enter home stretch
Demand fell 1.4 per cent from the previous month in May, the statistics office said on July 4.
German factory orders dropped for the first time in four months as businesses at home were wary of committing to large investments before uncertainty over trade with the US is resolved.
Demand fell 1.4 per cent from the previous month in May, the statistics office said July 4. That's worse than all but one estimate in a Bloomberg survey. Orders were still up 5.3 per cent from a year ago.
Manufacturers in the continent's largest economy are anxiously awaiting the results of Europe's negotiations with the US. Less than a week before a deadline to seal a deal ends, signals out of Brussels suggest punitive levies may be avoided. The outcome could mean Germany returns to growth – or extends a rotten few years without it.
If the talks are successful, the Bundesbank predicts the economy will tread water in 2025 before staging a 'significant' recovery thanks to infrastructure and defense spending. It sees output jumping by 1.2 per cent in 2027.
But concern over trade has dented confidence and forced firms including Continental and Merck to cut their outlooks. Others such as ZF Friedrichshafen and Robert Bosch are shedding jobs and closing factories due to muted demand.
Investment goods orders from within Germany slumped 12.7 per cent in May from the previous month, with overall domestic factory demand down 7.8 per cent. Orders from abroad rose 2.9 per cent.
There are some bright spots.
The Economy Ministry said that despite May's setback, the underlying trend in industrial demand are 'on an upward trajectory', even as orders remain volatile amid high trade and geopolitical uncertainties.
'Even if companies' business expectations are now brightening again, a renewed slowdown in industrial demand cannot be ruled out in the further course of the year,' it said in a statement.
While a gauge measuring business conditions in manufacturing has indicated contraction for three years, firms are slowly stepping up production, hoping the government will soon kick off its stimulus.
Data for industrial production for May are due early next week and could show a contraction too. Numbers from France published July 4 revealed an unexpected decline of 0.5 per cent from a month earlier. Manufacturing output alone fell 1 per cent with even steeper decreases in coking and refining, electronic products, and the automobile and pharmaceutical industries.
By contrast, industrial output in Spain expanded in May. BLOOMBERG
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