Drop in September new orders suggests that German industry can still not shift into higher gear
New orders dropped by 0.6% MoM in September, from 0.9% in August, on the back of both weaker domestic and foreign demand. On the year, new orders were still up by 2.7%. At the sector level, the September decrease was driven by weaker demand for capital goods (-1.6% MoM), while demand for consumer and intermediate goods increased somewhat.
The initial relief after the Brexit shock provided by two positive months with increasing new orders has now given room for realism. The German industry is still running low on fuel. New orders have actually been stagnating for almost two years now. While in 2014, new orders on average increased by 0.4% every month, they dropped by an average 0.2% in 2015 and currently show a meagre 0.1% average monthly growth rate for the first nine months of 2016. It is hard to see how the German industry can shift to higher gear. Against this background, the optimism reflected in surging confidence indicators is in our view striking.