German industry got off to a surprisingly weak start to the second quarter. Given the further economic outlook, this is sobering for economists.
Surprisingly, German industry again had to accept falling orders in April. Orders fell by 0.4% compared to the previous month, according to the Federal Statistical Office. Economists polled by Reuters had expected growth of 3.0%. The slump was sharper than previously known, following a 10.9% drop in orders in March, and was the largest drop in orders since the coronavirus pandemic hit in April 2020. Orders received in April fell 9.9% compared to the same month last year.
“Contrary to expectations, new orders did not recover in April despite the decline in March,” commented Jörg Krämer, Chief Economist at Commerzbank. This is a bad sign. “The technical recession in the winter half of the year is not a mistake.” Coupled with the global interest rate hike, there are many signs that the German economy will shrink again in the second half of the year.
no motivation for them industrial production
“The export-oriented German economy is particularly affected by the still weak global economy and the decline in orders from the euro area,” the Federal Ministry of Economics said. Domestic demand, on the other hand, was relatively stable. “However, all in all, weak new orders do not yet point to a short-term growth driver for industrial production.”
Specifically, domestic demand rose 1.6% mom in April, while foreign demand fell 1.8%. Orders for both capital goods and consumer goods were lower than the previous month. In contrast, orders for intermediate goods rose. Especially large orders create a burden. Without this volatility factor, total order intake would have increased by 1.4%.
Alexander Krüger, chief economist at Hauck Aufhäuser Lampe Privatbank, called the poor start to the second quarter very disappointing. “That means the economic sentiment is becoming more and more volatile.” Things are still going smoothly in this industry. “In any case, the downtrend is intact and has been going on for over a year.” Weak phases in the U.S. tend to reinforce this. Orders remain backlogged and “the industry will continue to struggle” because of climate policy.
On the other hand, German service providers saw an increase in turnover
The German economy will shrink in late 2022 and early 2023 and is therefore in a technical recession. Jörg Angele, an analyst at asset manager Bantleon, said that based on the latest data, it is now clear that it will also contract in the second quarter. “As a result, Germany is still deeply mired in a recession with no sign of ending.” As a result, overall economic output should also fall significantly in 2023. “Hopes for an imminent rise are not going to materialize.”
However, the Ministry of Economy pointed out that the development in various fields is not weak. The fields of motor vehicles and motor vehicle parts and chemical products show a growth trend. On the other hand, the fields of pharmaceutical products and mechanical engineering declined.
Meanwhile, sales at German service providers rose slightly. Compared with the previous month, earnings adjusted for inflation rose (in real terms) by 0.9% in March, according to data from the Federal Statistical Office today. Compared to March 2022, this represents an increase of 7.0%. Compared with the previous month, sales in the information and communications sector rose the most, up 2.8 percent, followed by the provision of other economic services, such as worker placement, at 1.5 percent.