German factory orders fall further in July, production likely to decline further in months ahead

German factory orders came in below expectations in July. Incoming orders of German manufacturing dropped further by 0.9 percent significantly in the month, as compared with consensus expectations of a counter-movement after the considerable minus in the previous month. Orders in the “other vehicle construction” sector, which are always quite volatile, even rose considerably, so that the “core size” of orders without this sector dropped 2 percent.

The timing of the summer holidays does not appear to have played a major role here, noted Commerzbank in a research report. Domestic orders have barely altered as compared with the previous month without other vehicle construction. Meanwhile, there was an evident minus from abroad, especially from outside the euro area, where the trend is now clearly downwards.

Partially, the recent softness seems to be linked to a special effect in the automotive industry, to which the Ministry of Economic Affairs refers. In fact, orders from abroad have fallen especially sharply in this sector. Nevertheless, even without this effect, the trend in incoming orders might clearly show a downward trend.

“As a result, production is likely to fall further in the coming months – in contrast to the consensus, we expect a minus of 2.5 percent in July – and the German economy as a whole is also likely to grow only moderately”, added Commerzbank.

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