Weaker foreign demand drove a bigger-than-expected drop in German industrial orders in January, suggesting that busy factories in Europe’s largest economy could shift into a lower gear in the coming months.
Christmas and New Year factory closures that extended well into January played a part, and commentators warned against reading too much into one month’s data.
Contracts for German-made goods fell by 3.9 per cent on the month in January after a downwardly revised leap of three per cent in December, the Federal Statistics Office said yesterday.
The reading was the weakest since January 2017 and the fall was bigger than the 1.6 per cent drop predicted in a Reuters poll of analysts. Excluding big-ticket items, orders were still down 2.4 per cent on the month.
“German new orders had a horrible start to the new year,” ING economist Carsten Brzeski said. He said economic fundamentals remained good and order books were still filled though, adding: “German industry does not look at risk of faltering anytime soon.”
The economy ministry said the overall trend in industrial orders was still pointing upwards despite the drop in January, adding that bookings were up 0.9 per cent in December and January compared to the previous two months.
Industrial orders rose 8.2 per cent on the year in January, the ministry said, adding that surveys are suggesting the global recovery will continue. “So German industry is likely to continue its positive development,” it said.
Foreign demand fell by 4.6 per cent on the month in January, driven by a decline in orders of nearly six per cent from other eurozone countries, a breakdown of the data showed. Orders for capital goods dropped five per cent, demand for intermediate goods fell 3.3 per cent, while manufacturers of consumer goods registered a rise in orders of 2.4 per cent.
The data suggested industrial orders could post a quarterly decline at the start of 2018 for the first time in quite a while, said Alexander Krueger of Bankhaus Lampe. While factories are likely to run at full speed for now to process their order books, the threat of protectionism is already clouding the outlook. A Sentix survey showed on Monday that investor morale in the euro zone deteriorated in March due to concerns about US President Donald Trump’s threats to impose hefty tariffs on steel, aluminium and car imports.