German industrial orders jump, underlying picture still clouded

3:17 am Friday, August 04th, 2023

BERLIN (Reuters) -German industrial orders rose in June against expectations for a drop, driven by sharp gains in the aerospace sector that left analysts divided over whether the reading represented a sustainable upturn.

German industry has been mired in the doldrums, with a PMI survey on Tuesday showing a manufacturing sector downturn deepened in July.

Friday’s federal statistics office data showed incoming orders rose by 7.0% from May on a seasonally and calendar adjusted basis. A Reuters poll of analysts had pointed to a drop of 2.0%.

Orders in the transport equipment sector excluding motor vehicles rose 89.2%, the office said, attributing that to one major aerospace transaction.

Excluding large orders, overall monthly activity would have declined by 2.6% in June.

“In this respect, today’s plus is hardly sustainable,” Commerzbank’s chief economist Joerg Kraemer said, adding that the trend in industrial orders was still downwards.

In the quarter to June, orders rose 0.2% from the previous three months.

The weak global economy and high energy costs remain a burden for the sector, said Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe bank.

“The thumb over the industrial sector is not turning upwards. For the time being, it will probably only be enough for a sideways trend,” he said.

Overall, foreign orders rose by 13.5% in June, while domestic ones fell 2.0%.

The statistics office also revised data for May to a 6.2% increase, down from 6.4% previously. In March, orders had slumped 10.9%.

Thomas Gitzel, chief economist at VP Bank, said the overall picture for 2023 looked relatively encouraging so far, noting that with the exception of March, new orders had steadily increased month on month.

“The situation is not as bleak as Germany’s economic situation is currently being portrayed as the sick man of Europe,” he said.

(Reporting by Maria Martinez, Writing by Friederike Heine, Editing by Miranda Murray and John Stonestreet)