EM weakness stronger than weak euro?

Despite the weak euro, German industry's business overseas is not really gaining momentum. Its positive effect is evidently being neutralised by the much slower growth of demand from the emerging markets. The May figures on incoming orders will show whether there has been any turnaround here recently. In the USA, good news is expected from the service sector.

Despite the weak euro, the trend for foreign orders in German industry has been downwards since the beginning of the year. That said, in April, both orders from the euro zone and fromother regions of the world have noticeably recovered. 

In our view, this does not mark a turnaround for the better, as one key reason for the weak order intake in recent months was the lower economic momentum in the Emerging Markets, especially Asia. And the latest Asian manufacturing Purchasing Managers' Indices do not yet raise any hope of a reversal.

Moreover, as there are no grounds for an end to the 18 month sideways movement in domestic orders, order intake is expected to show a fall of 1.5% versus the previous month. The downward trend for incoming orders naturally also speaks against a continued rise in output.

Therefore a fall is expected in May of 0.5% on the previous month, which would mean an average for April and May that is slightly above the average for the first quarter. Much stronger growth for the overall economy than in the first three months would thus not be evident, says Commerzbank.