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7 Jun, 2023 05:24

EU’s economic engine grinding to a halt

German factory orders fell sharply in machinery, equipment, and miscellaneous vehicle production
EU’s economic engine grinding to a halt

Factory orders in Germany dropped in April amid persistently high prices that caused a decline in large-scale purchases, data from the country’s federal statistics office Destatis showed on Tuesday.

Overall new orders in manufacturing fell by 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 decline was notable in comparison to last year’s figures, with orders plunging 9.9% versus last April.

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.”

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