German factory orders plunge 10.6% as recovery remains fragile
German factory orders fell sharply in August, highlighting the fragility of the recovery in Europe’s largest economy, official data showed Tuesday.
New orders, a key indicator of future industrial activity, declined 10.6 per cent from July, according to provisional data from Germany’s statistics agency Destatis.
The fall was far steeper than the 1 per cent decline forecast by analysts surveyed by financial data provider FactSet and marked the first monthly drop in four months.
The decline was driven mainly by a sharp fall in large-scale domestic orders. Orders in the category covering military vehicles, aircraft, ships and trains plunged by more than 60 per cent.
Demand in this category has surged in recent years as Germany increases defence spending amid Russia’s war and growing concerns over US security commitments to Europe.
Germany’s economy ministry described the August figures as a “marked setback”, while noting that the underlying picture was more stable once large-scale orders were excluded. Without those orders, new business was virtually unchanged from July.
The ministry also warned that the growing importance of public procurement had made factory-order data particularly volatile.
Looking beyond the monthly figures, the trend remained somewhat positive. New orders from June to August were 1.3 per cent higher than during the previous three-month period.
Germany’s economic recovery is facing additional pressure from an energy shock linked to the US war against Iran. However, the economy has so far absorbed the fallout better than initially expected.
Leading German economic institutes recently doubled their forecast for economic growth this year to 1.3 per cent, suggesting that the country’s prolonged period of stagnation may be easing.
