German factory orders for January were slightly lower than in December, registering -0.1%. However, this is smaller than one could have feared against the backdrop of recent decline in sentiment. The burden on manufacturing, in particular, from the crisis in emerging nations has been limited till now. However, in the coming months, this is likely to change with production expected to stagnate in medium term.
This was the second consecutive decline in factory orders. Excluding the always extremely volatile orders in the "other vehicles" sector, -0.6% was slightly larger than the monthly decline of 0.1%. However, measured against the recent weak business sentiment, the figures are relatively positive. This is partially because the factory orders had a smaller impact from the crisis in emerging markets. Factory orders from outside the euro area dropped 2.1%.
However, even though the figures do not currently confirm the recent decline in the Ifo business climate or the purchasing managers' index, there are no signs of a markedly and sustainable upturn in German industry. Actually, orders have made up for part of the slowdown in autumn.
Production likely grew considerably in January. However, on a slightly longer-term perspective, order intake still indicates towards a sideways movement in production. This is also because weakness in emerging markets will possibly have more impact in the coming months. This implies that the euro area is unlikely to register higher growth rates in near future.
