German Factory Orders Rebound In September

November 6, 2019

Germany’s factory orders growth exceeded expectations in September, driven by both domestic and foreign demand, data from Destatis revealed Wednesday.

However, a closely-watched private survey showed that Germany’s private sector contracted in October due to the weakness in manufacturing.

Factory orders grew 1.3 percent month-on-month in September, reversing a 0.4 percent fall in August and faster than the expected rise of 0.5 percent.

Domestic orders increased 1.6 percent and foreign demand advanced 1.1 percent. New orders from the euro area were down 1.8 percent, while that from other countries increased 3 percent.

On a yearly basis, new orders declined 5.4 percent in September, which was slower than the 6.5 percent fall seen a month ago. Economists had forecast a 6.3 percent decline.

Further, turnover in manufacturing decreased 1.4 percent month-on-month, in contrast to an increase of 1.3 percent in August.

In the euro area, Germany remained the only country inside the contraction territory in October, according to the final Purchasing Managers’ survey published by IHS Markit.

The final composite output index edged up to 48.9 from 48.5 in September, and was higher than the flash 48.6. A score below 50 indicates expansion. The downturn in output remained centered on the manufacturing sector.

Although the services PMI rose to 51.6 from 51.4 in September, the latest pace of growth was the weakest since the current upturn began in 2013.

Demand for goods and services continued to decline in October, with inflows of new business falling for the fifth time in the past six months. New export business remained particularly weak.

For the coming months, production is expected to stabilize at a low level at best, so that real GDP will probably only stagnate in the fourth quarter after the expected slight decline in the third quarter, Ralph Solveen, a Commerzbank analyst, said.

In its October monthly report, the Bundesbank said the biggest euro area economy might have entered a technical recession in the third quarter. However, a deep recession is not expected.

The government forecast 0.5 percent expansion for 2019 and 1 percent growth for next year. The International Monetary Fund also forecast the German economy to grow only 0.5 percent this year.


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