German industrial orders fall unexpectedly

Berlin (Reuters): German industrial orders dropped for the third month running in March due to weak foreign demand, data showed yesterday (7 May), in a sign that factories in Europe’s largest economy are facing headwinds from rising protectionism and a stronger euro.

Contracts for German goods fell 0.9% after a revised drop of 0.2% the previous month, data from the Federal Statistics Office showed. Analysts polled by Reuters had on average predicted a 0.5% rise in orders.

The last time that industrial orders, a volatile indicator on a monthly comparison, posted three consecutive drops was in mid-2015.

 “A decline of 0.9% is a setback. That really hurts,” VP Bank Group analyst Thomas Gitzel said.

 “The economy is slowing down, that’s the sure take-away from today’s industrial orders data,” Gitzel said, adding that some growth forecasts would soon have to be revised down.

The government last month cut its 2018 growth forecast to 2.3% from 2.4% and expressed concern about international trade tensions. “The debate about tariffs has probably created great uncertainty in Europe’s export-driven industry,” Gitzel added.

As Europe’s biggest exporter to the United States, Germany is desperate to avoid an EU trade war with the United States.

In the run-up to a June 1 deadline for US President Donald Trump to decide on whether to impose steel and aluminium tariffs on the EU, Germany is urging its European partners to be flexible and pursue a broad deal that benefits both sides.

In a further sign that the looming tariffs are a concern, investor morale in the euro zone deteriorated for the fourth month in a row in May to hit its lowest level since February 2017, a survey by the Sentix research group showed.

Sentix Managing Director Manfred Huebner pointed to fears of a protectionist spiral and the stronger euro which makes goods more expensive for clients outside the single currency bloc. The drop in industrial orders was led by foreign orders which fell by 2.6%, while domestic orders rose 1.5%, the data showed.