German order intake falls sequentially in January, manufacturing likely to continue to decelerate economy

German order intake dropped sequentially in the month of January. The trend in incoming orders continues to show a clear downward trend, even though the result for the earlier month was upwardly revised significantly. German manufacturing has got off to a subdued start in the New Year. The order index dropped 2.6 percent sequentially. Not only did the sentiment indicators continue to decline in January and February, but incoming orders also dropped. Consensus expectations were for a rise of 0.5 percent.

Meanwhile, the December figure was upwardly revised by an unusually large amount from -1.6 percent to +0.9 percent, which signified that orders on average in the fourth quarter were even slightly higher than in the third quarter. However, with the subdued January figure, the trend continues to indicate clearly downwards.

Some of the fluctuations in recent months are linked to the volatility of orders in the automotive sector, which dropped again in January following a solid rise in the course of the fourth quarter. These are less likely to reflect wider economic problems, but are a consequence of the problems associated with the switch to the new WLTP emissions test procedure, noted Commerzbank in a research report. This is why the order intake excluding auto orders and the always very volatile orders in the “other vehicles” sector certainly give a better impression of the underlying trend. Here the downward trend that started in the summer continued in January.

In spite of the softer orders in January, production in the automotive sector is still anticipated to rebound in the months ahead, said Commerzbank. This is because orders are roughly back at the level before the WLTP problems, while production is still considerably lower. However, for the other sectors of manufacturing, production will probably drop, which will apply the brakes on the German economy in the first half of the year.

“We have therefore lowered our growth forecast for this year from 1.2 percent to 0.6 percent. Only for the second half of the year a somewhat stronger underlying momentum is likely. However, for this to materialize demand from abroad will have to pick up again. Here we bet on the expansionary measures of Chinese economic policy, which should boost demand for German and European products again”, added Commerzbank.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Euro was bearish at -80.4261, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 20.7616 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex