August Sees German Industrial Orders Rebound, Yet Outlook Remains Uncertain

08 Oct, 2023

August Sees German Industrial Orders Rebound, Yet Outlook Remains Uncertain

In August, German industrial orders exceeded expectations with a 3.9% increase on a seasonally and calendar-adjusted basis, as reported by the Federal Statistics Office. This surge was primarily driven by a substantial rise in the production of computing, electronic, and optical products. A Reuters poll had anticipated a more modest 1.8% increase.

Ralph Solveen, the chief economist at Commerzbank, noted that this development signifies a stabilization of incoming orders after a two-year decline. However, this stabilization is occurring at a lower level than before, necessitating gradual production adjustments by companies in the upcoming months.

A less volatile three-month comparison revealed a 4.9% increase in new orders for the period from June to August compared to the previous three months.

This uptick in August came on the heels of a significant decline in the previous month. The statistics office revised July's drop to 11.3% compared to June, down from a provisional decline of 11.7%.

The surge in August was propelled by a remarkable 37.9% increase in the manufacturing of computer, electronic, and optical products. The manufacturing of electronic components played a significant role in this growth.

Foreign orders experienced a 3.9% uptick, while domestic orders rose by 4.0%, according to the data.

Despite the positive August data, Germany's manufacturing sector, which contributes to approximately one-fifth of its economy, remains entrenched in a downturn. The HCOB final Purchasing Managers' Index (PMI) for manufacturing in September stood at 39.6, well below the 50 level that separates growth from contraction.

Bastian Hepperle, senior economist at Hauck Aufhaeuser Lampe Privatbank, expressed caution due to the weak external environment and high levels of uncertainty in Germany. He anticipated that the manufacturing sector's challenging phase would persist.

While there are positive signs in global manufacturing stabilization, important foreign markets continue to face difficulties, and soaring energy prices pose a significant burden, according to Thomas Gitzel, chief economist at VP Bank. Nonetheless, Gitzel expressed hope that, after bottoming out, there might be a gradual improvement in the sector.