Declining Demand Causes Sharp Fall in German Manufacturing Orders

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New orders at German factories fell considerably more than expected, a further indication of declining demand for goods from the key manufacturing sector of Europe’s largest economy.

According to the German statistics office Destatis, manufacturing orders plummeted by 11.7% in July on a monthly basis. This significant drop follows a slight increase of 7.6% in June. Economists had predicted a more moderate decline of 5.0%, highlighting the unexpectedly weak performance.

One of the main factors contributing to this sharp decline was a large manufacturing order reported in June within the air and spacecraft industry, as indicated by Destatis.

Looking beyond this volatile component, new orders actually experienced a slight increase of 0.3% in July on a monthly basis.

However, several sectors witnessed a decrease in orders compared to the previous month, including computing, machinery, electrical equipment, and metal products.

In contrast, the motor vehicle industry saw a boost in new orders, with an increase of 2.7% in July as reported by Destatis.

The weakening global demand is evident from the decline in orders to the euro area by 24.4% and the rest of the world by 4.1%. Even domestic orders saw a significant fall of 9.7%.

These latest figures add to the prevailing gloomy economic outlook for Germany. A recent purchasing managers’ survey revealed that manufacturing backlogs in August experienced the sharpest rate of decline since June 2009, excluding the impact of the pandemic. Consequently, goods production continued to decrease.

It is clear that Germany’s manufacturing sector is facing significant challenges due to diminishing demand, both domestically and globally.

— Ed Frankl

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