Carsten Brzeski’s blog

German new orders drop sharply in April

New order shocker. German new orders dropped sharply in April, adding to evidence of continued stagnation in the German industry. New orders declined by 2.0% MoM. On the year, new orders were down by 0.5%. The only upside of today’s data is the upward revision of the March increase to 2.6%, from an initial 1.9% MoM. The sharp revision once again illustrates how blurred monthly new order data can be, particularly during vacation periods.

Today’s drop was driven by a sharp decrease in demand from non-Eurozone countries, illustrating weakness in China and other global export partners. Some might even see a Brexit element in this decline. At the same time, domestic demand and demand from Eurozone peers increased again by 1.3% MoM and 2.5% MoM respectively. Particularly demand from other Eurozone countries has performed well over the last months.

Looking ahead, there is little reason to see a quick brightening of the outlook for German industry. Instead, the outlook will remain mixed. Companies are still reducing their inventories to satisfy new orders. At the same time, however, a slight increase in capacity utilization (though still only round historical averages) and backlogs of work should provide enough support for the industry not to fall off a cliff. In sum, industrial muddling through in Germany looks set to continue.