German industrial orders rise for first time in 2024

13, Aug - NEWS

German industrial companies received more orders in June than in May. This is the first time in 2024 that the secondary sector of the European locomotive has seen a positive balance of orders, namely an increase of 3.9% month-on-month, the Federal Statistical Office (Destatis) said in a statement. This would seem to be good news and a symptom that the core sector of the German economy is starting to climb out of the hole, but if you compare the data on a quarterly basis (April to June), the situation changes. Destatis highlights that they fell by 1.4%, but it is most remarkable when the comparison is made on an annualised basis. Compared to June 2023, orders are down 11.8%. Moreover, orders fell very sharply in May, notably by 1.7% month-on-month and 8.7% year-on-year.

Among the factors driving demand for orders was the automotive industry, whose orders rose 9.3% last month. Also important were the steel sector (+9.8%) and other transport vehicles (aircraft, ships and trains), whose orders were up 11.7% on the previous month. However, the overall result was negatively affected by a decline in the production of data processing equipment, electronic and optical products (-7.9%).

Growth in orders does not save the automotive industry from the crisis

In the capital goods sector, incoming orders in June 2024 increased by 9.2% year-on-year in May. In contrast, incoming orders for intermediate goods fell by 1.5% and those for consumer goods fell by 7.1% compared to the previous month. These positive results are very encouraging, especially for the automotive industry, but a recent survey published by the Ifo Institute claims that the business climate in this industrial sector deteriorated again in July. Specifically, the index fell to -18.3 points, down from negative 9.5 points in June.

"The automotive industry is sinking deeper and deeper into the crisis," says Anita Wölf of the ifo Centre for Industrial Organisation and New Technologies. In fact, the Federal Ministry of Economic Affairs said in a statement that the coalition government's approval of the spending ceiling and improved results in industry "may indicate an increase in investment in the second half of the year". However, they warned that a broader recovery in the country's industrial activity is unlikely.

Germany's GDP slump is exacerbating a crisis in the ruling coalition

This positive data comes after it was confirmed last week that Europe's locomotive economy unexpectedly contracted in the second quarter. Specifically, it fell by 0.1% compared to the first three months of the year, when Germany's GDP grew by 0.2%. In this regard, the Bundesbank published in its July report that "temporary hopes for a speedy recovery in industrial activity were clearly dampened after the publication of data for May." Although central bank experts assure that economic activity was a little stronger in the third quarter.

The truth is that these economic difficulties Germany is experiencing are a real headache for the traffic light coalition. Finance Minister Christian Lindner himself said last week that further fiscal tightening is possible, despite the fact that budgets have already been agreed.