EU’s economic engine grinding to a halt

Lazy eyes listen


Factory orders in Germany fell in April due to continuously high costs, which led to a dip in large-scale purchases, according to data from the country’s federal statistics office Destatis released on Tuesday.

Manufacturing new orders declined 0.4% from the previous month. The drop in bookings was smaller than in March, when they plummeted 10.9% from February, the biggest fall since April 2020 during the Covid-19 lockdowns. However, the drop was significant in comparison to previous year’s numbers, with orders falling 9.9% versus April of last year.

The data revealed significant differences in orders across industrial sectors. Bookings in machinery and equipment manufacturing fell 6.2% month-on-month in April, while miscellaneous vehicle construction, which includes ships, trains, aircraft, spacecraft, and army vehicles, showed a 34% plunge. These sectors had a particularly strong negative impact on the overall statistics, Destatis said.

New orders in the consumer goods and capital goods sectors also dropped, by 2.5% and 1.7% respectively. Electrical equipment and motor vehicles, on the other hand, saw respective gains of 12% and 2.4%.

Overall domestic orders were slightly up, by 1.6%. Foreign orders, meanwhile, dropped by 1.8%.

Analysts attribute the drop in manufacturing orders to elevated prices and tight monetary policy, which are dragging down demand. Germany has formally entered a recession after seeing two consecutive quarters of economic contraction.

Meanwhile, the German Economy Ministry said that the country’s “export-oriented economy is suffering particularly from the still weak global economy and the decline in orders from the euro area.”

According to economists at Commerzbank, the existing order backlog may be sufficient to support German industry “for a few months.” However, given the dearth of new orders, industrial activity is likely to see “a significant decline” in the second half of the year.

“Industry is then likely to play a major role in causing the German economy to contract again.”