In May, German industry surprisingly recorded the largest increase in orders in almost three years due to the strong demand for vehicles. The orders increased by 6.4 percent compared to the previous month, as announced by the Federal Statistical Office on Thursday. That was the strongest increase since June 2020, when there was a first recovery from the slump at the beginning of the corona pandemic.
Economists polled by Reuters had expected an increase, but only by 1.2 percent. Without major orders, however, the increase would have been only half as high. In April, new business grew 0.2 percent, while in March it had fallen 10.9 percent, the sharpest drop since April 2020. The federal government, business associations and economists therefore see no reason for euphoria.
Economic experts do not yet see a trend reversal
“All in all, the recently fluctuating orders are stabilizing,” emphasized the Federal Ministry of Economics. The less fluctuating three-month comparison shows how difficult the situation remains despite the unexpectedly good performance: Here, orders from March to May were 6.1 percent lower than in the three months before. “Hopes for a trend reversal are still premature,” warned the economics expert at the German Chamber of Industry and Commerce (DIHK), Jupp Zenzen.
In Germany, companies were reluctant to place new orders due to rising interest rates, high energy prices and uncertain prospects. “Demand from abroad also remains weak in view of the cooling global economy,” said Zenzen.
Economists are also not giving the all-clear. “At first glance, the increase in orders in May looks great,” said Commerzbank-Chief economist Jörg Kramer. “But half of it is due to the fact that the large orders, which have always been fluctuating, are recovering.” However, the trend in new business is showing a decline, and companies have also processed most of the orders that were left pending during the Corona crisis. There are therefore many indications that the German economy will contract again in the second half of the year. Alexander Krüger from Hauck Aufhäuser Lampe Privatbank takes a similar view: “The weak global economic environment will hardly spark any new wind of orders. The production outlook for the second half of the year remains clouded.”
Vehicle industry in the plus
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 growth of 137.1 percent. The latter includes the construction of ships, rail vehicles, aircraft and spacecraft, and military vehicles.
Not only orders grew in May, but also real sales in the manufacturing sector: They were 2.7 percent higher than in the previous month after there had been a minus of 0.2 percent in April.
Make the export dependent industry create the global interest rate hikes
, with which central banks combat high inflation. 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 still complains about material shortages.
In June, 31.9 percent of those surveyed reported bottlenecks in intermediate products and raw materials. This is compared to the previous month of May (35.3 percent). a slight improvement, as the Munich Ifo Institute announced. According to Klaus Wohlrabe, head of the Ifo surveys, the relaxation can hardly mitigate the downturn in the mood in the industry. Although orders can now be processed more quickly, there are still too few new orders coming in at the moment.