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German new orders alarms caution for industrial outlook – ING

FXStreet (Delhi) – Carsten Brzeski, Research Analyst at ING, notes that the German new orders disappointed in September, sending a first sign that the summer slump of the economy could have been more than only a vacation-driven breather.

Key Quotes

“New orders decreased by 1.7% MoM, from -1.8% in August and -2.2% in July. This was the first time new orders dropped in three straight months since 2011. On the year, new orders are now down by 1%.”

“The September decrease was driven by both domestic and foreign demand. Particularly, the sharp drop in new orders from Eurozone peers (-6.7% MoM) indicates that the Eurozone stagnation is far from being over. The only bright spot in today’s new orders data was the small increase of orders from countries outside of the Eurozone, suggesting that at least the slowdown in China and emerging markets only has a limited impact on the German industry. To be clear, these German data are still pre-Volkswagen. Any possible impact from the Volkswagen crisis on the German economy will at the earliest be felt in October.”

“Obviously, it would be premature to panic after a single new order data release. However, the fact that new orders have dropped for three consecutive months suggests that our positive take on the German industry got some scratches.”

“Nevertheless, despite weaker order books during the summer months, production expectations have increased again in recent months and are above the average level seen in the first half of the year. At the same time, inventories have remained relatively stable.”

“All in all, a mixed picture for the industry with a downward bias. At the moment, strong domestic demand should more than offset the weakening of industrial activity but today’s data suggest that the industry should be prepared for stormier weather.”

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