German Factory Orders Slump Most Since 2009 on Investment

Posted March 21, 2017

"Industrial orders were extremely influenced by large contracts in the last two months reported (December and January)", the federal economy ministry in Berlin commented in a statement.

Analysts said a strong 3.7 percent monthly increase in factory sales in January coupled with robust business confidence surveys pointed to the manufacturing sector contributing to growth during the first quarter of 2017.

Andreas Scheuerle of Deka Bank said there was no need to be anxious, pointing to strong indicators for the broader economy.

Domestic orders logged a double-digit fall of 10.5 percent and foreign orders decreased 4.9 percent in January.

The biggest fall came for capital goods makers, who saw 9.9% fewer orders, while producer goods firms lost 4.0% and consumer goods 2.0%.

Markets appeared to shrug off the data.

Total industrial production rose by 2.8% month-on-month in January, helping to nudge the year-on-year rate of advance to 0.0% from -0.1%.

German exports are already at risk of being hit by protectionist policies expected to be put in place by Donald Trump.

The government forecasts economic growth will slow to 1.4 percent this year from 1.9 percent in 2016.

New orders are highly volatile, but the fluctuations and size of volatility since late-summer have been nearly unprecedented, Carsten Brzeski, an ING economist, said. Excluding large orders, January's data showed a smaller fall of 2.9%. The December increase in industrial orders was the highest since July 2014.

"Companies remain optimistic despite growing economic and political concerns".

Thomas Strobel of UniCredit said he expected manufacturing to contribute to growth in the January to March period.