German Manufacturing New Orders Decline in April

Staff wear protective masks at the Volkswagen assembly line in Wolfsburg, Germany, on April 27, 2020. Swen Pfoertner/Pool via Reuters

New orders in manufacturing declined in April for the third time in a row in Germany, according to the latest data from the Federal Statistical Office (Destatis).

On a seasonally and calendar-adjusted basis, new orders in April fell by 2.7 percent compared to March, a June 7 press release said. Excluding major orders, new orders decreased by 1.2 percent.

Compared to April 2021, new orders were lower by 6.2 percent. “The decrease of new orders in manufacturing is mainly due to orders abroad: foreign orders decreased by 4.0 percent in April 2022 on the previous month.”

“New orders from the non-euro area went down by 3.0 percent. New orders from the euro area fell by 5.6 percent and domestic orders registered a decrease of 0.9 percent on the previous month,” the release stated.

Capital goods producers registered a decline of 4.3 percent in new orders, which shows a “growing reluctance to invest” given the “politically and economically difficult times” the release said. New orders of intermediate goods producers fell 0.3 percent, while those of consumer goods declined by 2.6 percent.

“The increased uncertainty caused by the Russian invasion of Ukraine continues to lead to weak demand, especially from abroad,” Destatis said in a statement, according to Bloomberg. “However, companies still have well filled order books.”

According to the German Machinery Industry Trade Association, there has been a “noticeable decline in incoming orders” in the machinery and plant engineering sectors. It blamed Russia’s war against Ukraine, a slowing economy in China, and continuing “serious supply chain issues” for the decline.

Orders fell by 7 percent in real terms in April, compared to April 2021, the association said in a June 3 press release. The April decline is the second consecutive monthly decrease, the press release said. While domestic orders fell by 17 percent, orders from abroad declined 2 percent.

Fears of a recession are also plaguing Germany. In the last quarter of 2021, the German economy had contracted by 0.3 percent. The usual definition of recession requires gross domestic product to contract for two consecutive quarters. During the first quarter of 2022, Germany registered 0.2 percent growth, narrowly escaping recession.

However, elevated energy prices and inflation weigh on the German economy. Wages have failed to keep pace with rising prices in the first quarter. Despite a 4 percent increase in cash wages, by the end of March, pay had declined by 1.8 percent on the year relative to prices, according to The Telegraph. Inflation was at 8.7 percent in May.

According to Claus Vistesen of Pantheon Macroeconomics, Germany will be in recession during the second half of the year.

“Even if you assume consumers have savings and they will spend some of those, the hit consumers in Germany and the eurozone will experience this year in terms of real wages is going to be significant,” he said to the media outlet.