12 Oct 2023 -

German industrial orders see summer uptick amidst prevailing challenges

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In August, German industrial orders witnessed a noteworthy bounce back, outpacing expectations, primarily due to a surge in the manufacturing of computing, electronic and optical products. However, the future for this sector still holds its fair share of uncertainties.

According to data released by the Federal Statistics Office, and reported by Nasdaq, orders saw a growth of 3.9% from the previous month, once adjusted for seasonal and calendar variations. This surge surpassed the predictions made by analysts in a Reuters poll, which had anticipated a 1.8% rise.

Ralph Solveen, the chief economist at Commerzbank, remarked, “This means that incoming orders have stabilised after a two-year decline.” But he also indicated a word of caution, stating that this newfound stability is still below the earlier levels. As a result, companies will find themselves revising their production strategies in the months to come.

An analysis revealed that new orders from June to August were up by 4.9% compared to the preceding three months. This rise in August provides a silver lining, especially considering the significant fall observed in July. The statistics office updated July’s figures, adjusting the decline to 11.3% month-on-month from an initially reported 11.7%.

The August growth was largely propelled by a 37.9% month-on-month hike in the manufacturing of computer, electronic, and optical products, with the production of electronic components playing a significant role.

Furthermore, the data showcased a balanced picture with both foreign and domestic orders, showing an increase of 3.9% and 4.0% respectively. However, Bastian Hepperle, a senior economist at Hauck Aufhaeuser Lampe Privatbank, expressed reservations: “The weak external environment and the high level of uncertainty in Germany still call for caution,” suggesting that the manufacturing sector’s sluggish phase might persist.

Even with August’s encouraging data, Germany’s crucial manufacturing sector, which contributes to around a fifth of the country’s economy, is grappling with challenges. The HCOB’s final Purchasing Managers’ Index (PMI) for manufacturing in September remained a worrying 39.6, significantly below the 50-mark that distinguishes growth from contraction.

Thomas Gitzel, chief economist at VP Bank, highlighted the struggles of vital foreign markets and the burden of rising energy costs. Yet, he also identified some glimmers of stability in global manufacturing, optimistically noting, “This feeds the hope that after a period of bottoming out, things will at least start to go up again a bit.”

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