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.