German factory orders fall in December

German factory orders came in below expectations in December. Sequentially, orders dropped 1.6 percent, as compared with consensus expectations of a rise of 0.3 percent. However, these figures are likely influenced strongly by special effects, noted Commerzbank in a research report. On a year-on-year basis, the orders dropped 7 percent, as compared with the fall of 3.4 percent seen in the prior month.

At first glance, the order intake figures published today appear to follow on seamlessly from the latest disappointing German economic figures. Manufacturing in December received 1.6 percent fewer new orders than in November. Nevertheless, a closer look reveals a less gloomy picture.

The figures for November were upwardly revised from -1 percent to a sequential rise of 0.2 percent. The Federal Statistical Office indicates to an unusually low number of large ticket orders, the number of which always fluctuates very strongly between the months. Without this effect, orders might even have risen 3.5 percent in December, according to Destatis. Nevertheless, the solid rise in car orders is not expected to prove sustainable either. On the other hand, orders that were postponed in autumn due to the issues with the conversion to the new WLTP emission measurement system are expected to have been placed now.

Without these two special effects, order intake might hardly have changed compared to November. Therefore, there can certainly be no talk of an upturn, but today’s figures do not indicate towards a fall in the demand for industrial products either.

“In any case, the development of production in the coming months is likely to be determined primarily by special effects. The strong 2.7 percent rise in real industrial sales reported today, for example, supports our expectation that production in December has risen sharply. However, this is likely to be primarily attributable to a recovery from the recently very low production in the chemical and automotive industries”, stated Commerzbank.

At 11:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 28.8633, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 82.702. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex