German factory orders fall sequentially in July, industrial production likely to have grown

The German factory orders data for July surprised on the downside. The total orders dropped 0.7 percent sequentially in the month, contrasting with consensus expectations of a rise of 0.3 percent. The decline was driven by subdued domestic orders.

Also, orders from abroad were unchanged. The decline in orders barely looks alarming, not least since it appears merely to have represented payback from consecutive rises of about 1 percent sequentially in each of the previous two months that were flattered by certain large-scale orders, noted Daiwa Capital Markets Research.

Stripping such exceptional major items, orders rose over 0.5 percent sequentially in July. The trend continues to be positive. On a three-month basis, orders were up 0.4 percent, half the rate in June, but close to the middle of the recent range.

Underlining the solid demand for German manufactured items in the past few quarters, on an annual basis, the pace or rise stayed little changed at 5 percent year-on-year, with growth vigorous for consumer, capital and intermediate goods alike. With surveys implying that demand stayed elevated in the summer, the ongoing strong growth in output is expected in months ahead.

“German industrial production data for July, due on Thursday, are expected to show growth of about ½ percent M/M, to take the annual rate back above 4 percent Y/Y”, added Daiwa Capital Market Research.

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