Germany’s Industrial Sector Rebounds as orders pick up

German Industry

The German industry was lifted as foreign demands on German industrial orders rebounded in May, although less than forecast, Thursday data showed, and the Economy Ministry said that this part of Europe’s largest economy is expected to continue gaining momentum.

An overall 1.0 percent increase was registered by factories for the month of May after contracts for ‘Made in Germany’ goods slipped by a downward revised 2.2 percent in April, as showed by Economy Ministry data.

The Economy Ministry said that the proportion of bulk orders for May was below average. The reading for the month of May missed the forecast of Reuters having a 2.0 percent rise.

According to Dirk Schlotboeller, an economist at Germany’s Chambers of Commerce (DIHK), “The German industrial sector is back in form and the decline in April was likely a one-off. Although increasing protectionism around the world is dampening the mood, business is going extremely well in Europe, Asia and also in the USA.”

However, others were less optimistic, including Bankhaus Lampe KG economist, Alexander Krueger. He said that the data was disappointing in the sight of bullish sentiment indicators such as Ifo, which showed business morale hitting a record high in June.

Capital goods bookings went up but the factories producing consumer and intermediate goods saw a demand slump.

The May data breakdown showed that domestic demand dropped by 1.9 percent while foreign orders went up by 3.1 percent, with orders from outside the euro zone climbing by 4.0 percent.

On the less volatile month comparison, orders dropped by 1.1 percent but the Economy Ministry said that the average order level for the April-May period was approximately at the same level as the strong first quarter.

The data goes with a survey showing that Germany’s manufacturing growth reached its highest level in more than six years in June as orders surged and manufacturers were increasingly buoyant about th production outlook.

Data from the VDMA industry association also showed engineering contracts climbing 17 percent in May from the previous year.

The German gross domestic product (GDP) growth for this year and next also had its estimates raised by Germany’s central bank and leading economic institutes, headed to a broad-based and self-reinforcing upswing propelled by vibrant domestic demand.

However, the government still remains cautious, forecasting 1.5 percent growth in 2017 and 1.6percent in 2018. This would be below the strongest rate in five years, which was the 1.9 percent growth in 2016.

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