Setback. German new orders decreased by 1.3% MoM in May, illustrating the difficulties the German industry still has to return to full strength. This was the second monthly drop in a row. On the year, new orders are down by 2.0%, from -0.3% in April. The drop was mainly driven by a sharp decrease of domestic orders (-2.0% MoM) and orders from other Eurozone countries (-3.9% MoM). Orders from non-Eurozone countries actually increased by 1.1% MoM. Although these numbers are disappointing, they have to be taken with a pinch of salt. This year, the month May had an unusually high number of public holidays and vacation, probably at least partly blurring the picture.
German new orders have been on a zig-zag trend for more than a year. Over the last twelve months, there were only two consecutive months in which new orders increased: February and March of this year. Still, the underlying trend is slightly positive. Since the beginning of the year, new orders have now increased by roughly 1%. The decomposition of this increase, however, reflects the harsh reality of the Eurozone crisis and the gradual decoupling of the German economy from its Eurozone peers. While orders from other Eurozone countries have dropped by roughly 6% since the beginning of the year, orders from non-Eurozone countries have increased by roughly 3%.
Looking ahead, today’s new orders illustrate that the German industry still has difficulties to return to full strength. In the short run, recent inventory reductions and still reasonably filled order books should ensure a gradual pick-up in industrial production. However, the medium-term outlook is not yet looking rosy.