Germany’s manufacturing new orders fell by a smaller-than-anticipated margin in October, driven by a decline in domestic demand, according to preliminary data from Destatis.
Orders decreased by 1.5% month-over-month on a seasonally and calendar-adjusted basis, better than the forecasted 2% drop. Excluding large-scale items, orders edged up by 0.1%.
September’s figures were significantly revised upward to a 7.2% gain, compared to the previously reported 4.2%. Destatis explained the adjustment stemmed from a delayed report of a large shipbuilding order, which also influenced October’s results.
Despite these adjustments, underlying trends remain weak. Core orders, excluding large-scale contracts, showed little improvement, reflecting ongoing struggles in the manufacturing sector.
Commerzbank economist Ralph Solveen highlighted that most companies in the Ifo survey rate their order backlogs as insufficient, with sentiment indicators offering little optimism for a near-term recovery. Solveen expects German manufacturing to remain sluggish, with the economy likely stagnating during the winter months.
Domestic orders plunged 5.3% in October, while foreign orders rose by 0.8%. A sharp 7.6% decline in eurozone demand was partially offset by a 6.3% increase in orders from non-eurozone countries.
Sector-wise, machinery and equipment manufacturing saw a 7.6% drop, and automotive demand fell by 3.7%. On the other hand, orders for basic metals rose by 10.2%, and demand for computer, electronic, and optical products increased by 8%.
Intermediate goods orders grew 0.9%, and consumer goods demand climbed 4.2%. However, capital goods production experienced a 3.6% decline in orders.
Conclusion
While Germany’s manufacturing sector showed some resilience in October, underlying weaknesses persist, particularly in domestic demand and core orders. The lack of substantial growth in order backlogs and cautious sentiment among manufacturers suggests a prolonged period of stagnation.
Unless broader economic conditions improve, the German manufacturing sector may continue facing challenges in the coming months.
Insight from RTTNews