German Orders Sink
German orders fell by 5.8% in August as foreign orders fell by 2.2% and domestic orders plunged by 10.9%. This weakness offsets a period of strength in July and June in which total orders had risen 3.9% and 4.6% in respective months, and in which foreign orders had risen by 5.2% and 1.4%, while domestic orders had risen by 2.2% in July and by 9.1% in June. The sizeable declines in August nullify or substantially blunt the strength in orders seen in the previous two months. Domestic orders measured year-over-year in July mark their first increase since February 2022; however, that gain is now gone and turned to a year-on-year drop in August. Foreign orders have had more episodes of showing gains year-over-year; they too showed a year-over-year gain in July, but in August that's also gone. However, foreign orders also showed a year-over-year gain in April of this year, and in March, and in December of last year. Year-over-year gains are not so unusual for foreign orders; however, gains have been very scarce for domestic orders.
Order trend- The trend for German orders is positive overall with a three-month growth rate of 9.6% up from -1.9% over six months and that's up from -4% over 12 months; the progression is a reassuring acceleration. However, the monthly detail and pattern of how this progression has been created is not so reassuring. Foreign orders are the driving force behind this improvement with a three-month real order growth rate at an 18.4% annual rate, up from 1.9% annual growth over six months, and that's up from a decline of 1.3% over 12 months. There is also progress in terms of domestic orders, but it's much less robust. Over three months domestic orders fall at a 2.5% annual rate; that's less than a 6.9% annual rate fall over six months which is less than an 8% drop over 12 months. It is a progression toward improvement, but these are all negative numbers.
Sales trends- Trends for real sales show mixed results in August compared to July. Over three months manufacturing shows a gain in real sales at a 0.4% annual rate; that's up from a 3.2% annual rate decline over six months, but the six-month decline was slightly worse than a 3.1% annual rate drop over 12 months. There's only a hint of better sales based on real sales trends; looking at sector data is not terribly rewarding either.
Industrial surveys- industrial gauges for Germany, France, Italy, and Spain all show negative readings in August. For Germany and Italy the negative readings worsen while for France and Spain the negative readings slightly improve month-to-month. There was also split performance in July between these four countries in terms of improvement or deterioration.
Quarter to date- Quarter-to-date trends show strong results for German orders overall, but these are supported by a tenuous monthly pattern that has the strength mostly back-loaded in June, and to some extent, in July as August parades significant weakness. Quarter-to-date German real orders are growing at a 16.9% annual rate, foreign real orders are up at a 20.4% annual rate, domestic real orders are up at a 12.5% annual rate. In the same quarter-to-date period, real sales overall, as well as by sector, produce negative numbers for growth.
Industrial data queue standings- The queue standings for the industrial data show Germany and Italy with extreme weakness as exhibited in their low standings on ranked data back to 1990. Both France and Spain have rankings just short of the 60-percentile mark, for each; it’s a reading above their respective median, but still a moderate reading- not a strong one.
Summing up The August orders report for Germany unravels what had been an improving trend. While real sales showed a rebound in August, it was not enough to create a solid uptrend for momentum. In the rest of Europe, industrial indicators rank from moderate to very weak. The German industrial picture remains soured while Europe shows no sign of breaking out of its industrial torpor.
Robert Brusca
AuthorMore in Author Profile »Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.