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German factory orders sank 7.4% in February

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FRANKFURT AM MAIN”•Industrial orders in Europe’s largest economy Germany plunged 7.4 percent in January, preliminary official data showed Tuesday, countering a sharp upswing in the previous month.

New orders”•a closely watched indicator of future economic performance”•had increased 5.2 percent in December, adjusting for price, seasonal and calendar effects, federal statistics office Destatis confirmed.

Analysts surveyed by Factset had predicted a much smaller fall in January of 2.5 percent.

Domestic demand for German industrial firms’ products fell much more sharply than foreign orders, at 10.5 percent compared with 4.9 percent, with orders from the eurozone contracting faster than those from countries outside the single currency area.

The biggest fall came for capital goods makers, who saw 9.9 percent fewer orders, while producer goods firms lost 4.0 percent and consumer goods 2.0 percent.

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January’s data showed a smaller fall of 2.9 percent in orders when large contracts –a volatile item that can see large swings from month to month”•were stripped out, Destatis said.

“Industrial orders were extremely influenced by large contracts in the last two months reported (December and January),” the federal economy ministry in Berlin commented in a statement.

“Even ruling out large contracts, the strong increase in orders in the final quarter of 2016 makes a weak start to the new year manageable,” the civil servants went on.

Comparing December plus January to October plus November showed a fall of just 0.4 percent in orders, the economy ministry pointed out.

Berlin also highlighted strong confidence surveys among industrial firms, suggesting a pick-up in business in the coming months.

“Today’s disappointing data is a good reminder that German industry is having more problems returning to full speed than buoyant sentiment indicators have been suggesting,” countered economist Carsten Brzeski of ING Diba bank.

January’s drop in new orders was the largest since 2009, he noted, following on from months of “almost unprecedented” fluctuations in the indicator since last summer.

“The data are the result of an unfortunate combination: Bulk orders propelled demand at the end of last year, and now the turbo fired in the other direction,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “In the context of sentiment indicators, there’s no reason for concern. I’m still convinced we’ll see a good quarter.”

Heightened uncertainty has weighed on business since June 2016, when Britain voted to quit the EU, and been sustained by Donald Trump capturing the White House on a protectionist platform, as well as upcoming elections in the Netherlands, France, and Germany in which anti-globalization parties stand to make strides. 

The euro was little changed and traded at $1.0596 at 8:41 a.m. Frankfurt time.

Domestic factory orders fell 10.5 percent in January from the previous month, led by a 16.8 percent slump in demand for investment goods, according to the report.

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