German Industrial Orders Tumble

German manufacturing orders plunged 4% from the previous month in September, far worse than expected, as recovery in the euro-zone slows from its rapid pace earlier this year, the economy ministry said Friday.

The fall follows a strong increase in orders of 3.5% in monthly terms in August and offers further evidence that Germany’s economic recovery has moderated significantly from the high growth rates posted last spring. (…)

September’s fall in orders was much worse than the 0.4% drop that analysts had predicted. Still, economists said the drop was largely a statistical correction, driven by a glut of large orders that pumped up the August data. "Although it was the biggest monthly decline since the start of 2009, there is no reason to worry," said Alexander Rees, an economist at UniCredit in Munich. "The less volatility stricken quarterly figures better reflect the fundamental picture."

But why did economists not see the “statistical correction” coming? Or is it the strong recent recovery in the Euro that is beginning to bite the other way?

In August, orders climbed a revised 3.5%, compared with the previously reported 3.4% rise. The September drop was led by 6.6% fall in foreign orders, which suggests the euro zone’s recovery is faltering. Orders from countries that use the euro dropped 13.3%, while foreign demand from beyond the euro zone was down a much more modest 1.2% on a month-to-month basis in September. Domestic demand also declined, but at a much lower rate of 0.6% from the previous month.

By sector, orders for investment goods showed the biggest decline, falling 4.5% month-to-month. Producer-goods orders also fell by 3.8% in monthly terms, while orders for consumer goods were up 0.3% from August.

In yearly terms, orders rose an unadjusted 13.9% in September, following an annual rise of 24.1% in August. The two-month comparison, which irons out some fluctuations in the data, shows that manufacturing orders rose 0.6% in the August-September period compared with June-July.

The weak order-data trend signals lower German industrial output for the months ahead. September output data are scheduled for release on Monday.

Full WSJ article

Chart from Haver Analytics


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