German orders fall at their sharpest rate in almost three years

Wednesday 06 August 2014 08.50
German industrial orders fell by 3.2% on the month as orders from the euro zone plunged by 10.4%
German industrial orders fell by 3.2% on the month as orders from the euro zone plunged by 10.4%

German industrial orders slid in June at their steepest rate since September 2011 as euro zone demand fell and geopolitical risks made firms cautious.

The drop suggests that this sector of Europe's largest economy will have a weak start to the third quarter.

Contracts fell by 3.2% on the month as orders from the euro zone plunged by 10.4%, data from Germany's Economy Ministry showed. 

That missed the Reuters consensus forecast for a 1% rise and undershot even the lowest estimate for a 0.5% decrease. 

A breakdown of data showed foreign orders slumped by 4.1%, with economists attributing this mainly to weakness in the single currency bloc rather than the Ukraine crisis. German firms also held back, with domestic orders down by 1.9%. 

Analysts said that today's data shows that downside risks for the German economy do not only come from geopolitical tensions but also from longer than expected weak demand from euro zone peers. 

The Economy Ministry said geopolitical developments and risks probably led to more cautious ordering, adding that growth in the industrial sector would tend to be moderate in the coming months. 

German factories producing capital goods took on 6.4% fewer bookings in June than in the previous month and consumer goods manufacturers got 0.4% fewer contracts. Orders for intermediate goods were the only bright spot, registering a 1.6% rise. 

The Economy Ministry said the order level in the second quarter was 0.6% below the level of the first quarter, largely due to weaker appetite at home. 

While the German economy had its strongest growth in three years in the first quarter, that was largely due to mild weather and it is generally seen slowing or even stagnating in the second quarter before accelerating again in the third. 

Data due out tomorrow is expected to show industrial output climbed by 1.3% in June.

The orders data for May was revised up to a drop of 1.6% from a previous -1.7%.