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German Factory Order Growth Exceeds Expectations

multibrandwarehouse jun06 lt

Germany's factory orders grew more-than-expected in April, driven by demand from non-euro area economies despite heightened trade tensions.

Data published by Destatis showed that factory orders grew 0.3 percent month-on-month in April, weaker than the revised 0.8 percent increase seen in March, but better than the expected 0.2 percent.

Domestic orders declined 0.8 percent, while foreign orders advanced 1.1 percent. New orders from the euro area decreased 5.8 percent. By contrast, demand from other countries was up 5.7 percent.

On a yearly basis, new orders in manufacturing fell at a slower pace of 5.3 percent in April following a 5.9 percent decline in March. Economists had forecast a 5.9 percent drop.

Further, data showed that manufacturing turnover decreased 0.6 percent on month in April, in contrast to an increase of 0.1 percent in March.

The economy ministry said industrial activity is set to remain subdued in the second quarter.

While today's industrial order data is definitely good news and gives reason for moderate optimism, it will still take a while before industry returns as a powerful growth engine for the entire German economy, Carsten Brzeski, an ING economist said.

Industrial production data is due on June 7. Output is forecast to contract 0.5 percent on month in April, offsetting March's 0.5 percent increase.

Data from VDMA showed that orders received in the mechanical engineering plunged 11 percent in April from last year due to weak domestic and foreign demand. This was the fifth consecutive decline in engineering orders.

The latest Purchasing Managers' survey indicated only moderate growth in GDP. The composite output index rose to 52.6 in May from 52.2 in April. The PMI survey indicated that the labor market continued to lose momentum.

Official data showed that the unemployment rate climbed in May for the first time since 2013.

The construction sector growth eased to a four-month low in May as firms responded to a first fall in new orders since August, IHS Markit data showed Thursday. The PMI fell to 51.4 in May from 53.0 in April.

The German economy managed to avoid a technical recession by stagnating in the final three months of 2018. Following that, the economy grew 0.4 percent in the first three months of 2019.

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