German industry received significantly more orders than expected in May: 6.4 percent compared to the previous month. Rising interest rates and material shortages are still causing concerns for companies.
In May, German industry recorded the largest increase in orders for almost three years, as announced by the Federal Statistical Office. Orders grew 6.4 percent month-on-month, the strongest gain since June 2020.
Economists surveyed by the Reuters news agency had expected an increase, but only by 1.2 percent. In April, new business grew by just 0.2 percent, but fell by 10.9 percent in March.
Positive development at home and abroad
“All in all, the recently fluctuating orders are stabilizing,” emphasized the Federal Ministry of Economics. However, the less fluctuating three-month comparison illustrates the continuing challenging situation: from March to May, orders were 6.1 percent lower than in the three months before.
Domestic orders in May rose 6.2 percent mom, while overseas demand rose 6.4 percent. The vehicle industry had a particularly positive influence with an increase of 8.6 percent and other vehicle construction with an increase of 137.1 percent. The latter includes the construction of ships, rail vehicles, aircraft and spacecraft, and military vehicles.
Every third industrial company complains material shortage
The export-dependent industry is struggling with the worldwide rise in interest rates, with which central banks want to get inflation under control. This makes loans for German export hits such as vehicles and machines more expensive, which in turn puts pressure on demand. In addition, almost every third German industrial company complains about material shortages.
In June, 31.9 percent reported bottlenecks in preliminary products and raw materials, after 35.3 percent in May, as reported by the Munich ifo Institute. “Unfortunately, the relaxation can hardly do anything to counteract the downturn in industry,” said Klaus Wohlrabe, head of the ifo surveys. “Orders can be processed faster, but too few new ones are coming in at the moment.”