The order situation in industry continues to fluctuate violently. After orders had recently increased, they fell in July more than they had in three years – mainly due to a special effect.
At the beginning of the second half of the year, orders in German industry dropped more than they had in more than three years. New business shrank by 11.7 percent in July compared to the previous month, as the Federal Statistical Office announced today. The last time there had been a sharper decline was at the beginning of the Corona crisis in April 2020. Economists surveyed by the Reuters news agency had only expected a drop of 4.0 percent.
Extensive major order in June distorts the picture
However, the sharp drop in new orders follows a strong increase in June, which at 7.6 percent was somewhat more pronounced than previously known. In May, too, it had risen significantly by 6.2 percent. This was due to large orders – most recently from the aerospace industry in particular – which have now been eliminated.
“The picture is not as bleak as it appears at first glance,” said Union Investment’s chief economist, Jörg Zeuner. “In the previous month, numerous large orders, including one for around 900 aircraft for the manufacturer Airbus, caused the pendulum to swing upwards.” As a result, new business in so-called other vehicle construction fell by 54.5 percent this time.
Above all, a “very extensive major order” in June caused a burden in the following month, according to the statisticians. Without major orders, incoming orders in July even increased by 0.3 percent compared to the previous month. In the three-month comparison, which fluctuated less strongly, incoming orders from May to July 2023 were 3.1 percent higher than in the three months before.
“Industry remains a problem child”
“In view of the gloomy business climate and the weak global economy, however, a sustained revival of industrial activity cannot be derived from this,” said the Federal Ministry of Economics. The chief economist at Hauck Aufhäuser Lampe Privatbank, Alexander Krüger, added: “The industry remains a problem child, the order books are significantly thinner than a year ago.”
Domestic orders in July fell by 9.7 percent compared to the previous month. Rising interest rates and high energy prices are currently dampening demand in the domestic economy. Foreign demand even fell by 12.9 percent, that from the euro zone by 4.1 percent. “Germany is dependent on the global economy,” said the chief economist at VP Bank, Thomas Gitzel. “The latter is currently not in good order.” China, for example, Germany’s most important trading partner, is currently weakening.
In July, the areas of IT and optical equipment (-23.6 percent), electrical equipment (-16.7 percent) and mechanical engineering (-8.7 percent) recorded falls in orders. On the other hand, incoming orders in the motor vehicle and motor vehicle parts sector (+2.7 percent), in the chemical sector (+0.5 percent) and in metal production (+1.0 percent) increased. Real sales in the manufacturing sector in July were 1.0 percent lower than in the previous month. In June there was a decline of 1.4 percent.