Slump in new orders in January shows that industry is still struggling to shift into a higher gear.
German new orders surprised with a dramatic 7.4% MoM drop in January, from a 5.2% MoM increase in December. The January drop was the largest fall in new orders since January 2009. On the year, new orders is now down by 0.9%. Particularly, domestic new orders disappointed, dropping by more than 10% MoM.
Obviously, new orders are highly volatile but the fluctuations and size of volatility since late-summer have been almost unprecedented. To some extent, the January drop can be explained by seasonal effects and a technical correction after the December surge. However, looking beyond short-term technical explanations, today’s disappointing data is also a good reminder that the German industry is having more problems returning to full speed than buoyant sentiment indicators have been suggesting.