By Maria Martinez (Reuters) -German industrial orders unexpectedly fell in July due to a drop in large-scale orders, data showed on Friday. German industrial orders declined by 2.9% on the previous
German Industrial Orders Decline for Third Consecutive Month in July
Analysis of German Industrial Orders
By Maria Martinez
Impact of Large-Scale Orders
(Reuters) -German industrial orders unexpectedly fell for the third straight month in July, dragged down by a drop in orders for big-ticket items such as aircraft, ships and trains, data showed on Friday.
Trends in Domestic and Foreign Demand
Industrial orders sank 2.9% on the previous month on a seasonally and calendar-adjusted basis, the Federal Statistics Office said. But excluding large-scale items, new orders were up 0.7% from June.
Future Economic Outlook
A Reuters poll of analysts had pointed to an overall rise of 0.5%.
Economy Minister Katherina Reiche said the data pointed to a drop in competitiveness that needed to be addressed urgently, while the country's leading economic institutes have already cut their economic growth forecasts for this year and next.
"We need no further warning signs to recognise that we must act decisively now and align all our policies consistently with competitiveness," Reiche said.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said incoming orders had been running below their long-term average since the start of 2024, and he warned against brushing off the fall in large-scale orders.
"Large contracts are also important for smaller companies because they generate follow-up orders for suppliers," de la Rubia said.
New orders for large transport equipment including aircraft, ships, trains and military vehicles, tumbled 38.6% from the previous month. A high volume of large-scale orders was recorded in this sector in June.
A 16.8% decline in new orders for electrical equipment also dragged down the overall result. By contrast, a 6.5% rise in new automotive industry orders helped limit the overall fall.
The less volatile three-month on three-month comparison showed that new orders in the period from May to July were 0.2% higher than in the previous three months.
The trend here remains weak for the time being, however, said Marc Schattenberg, economist at Deutsche Bank Research.
"Not least due to headwinds in foreign trade, it may still take some time before there is a noticeable stabilisation in industrial activity," Schattenberg said.
Both foreign and domestic demand remain weak. In July, foreign orders dropped by 3.1% on the month, while domestic orders fell by 2.5%.
New orders in June fell a revised 0.2% on the month, a much smaller drop than the initially reported 1.0%. The revision was due to corrected data reported by a large enterprise in the automotive industry.
Commerzbank expects demand for industrial goods to pick up in the coming months as global interest rate cuts by central banks should boost demand for capital goods, and German companies continue to be well-positioned on the world market in this area.
"However, the very hesitant turnaround in order intake indicates that this upturn will be rather moderate," Commerzbank's senior economist Ralph Solveen said.
(Additional reporting by Daria Bogdanska in Gdansk; Editing by Thomas Seythal, Rachel More, Alex Richardson and Hugh Lawson)
