Drop in German industrial orders adds to recession signs

Published: October 07, 2019 13:15:41 | Updated: October 10, 2019 15:18:42

FILE PHOTO - Unfinished pliers still glow after being hot-formed by a hammer at the factory of Knipex, in Wuppertal, western Germany, October 25, 2016. REUTERS/Wolfgang Rattay

German industrial orders fell slightly more than expected in August on weaker domestic demand, data showed on Monday, adding to evidence that a manufacturing slump is pushing Europe’s largest economy into recession.

Contracts for ‘Made in Germany’ goods fell 0.6 per cent from the previous month, with demand for capital goods down 1.6 per cent, the Economy Ministry said. The overall monthly fall compared with a Reuters consensus forecast for a drop of 0.3 per cent.

“The German economy is in the midst of a recession. Today’s data make that clear again,” said Thomas Gitzel, economist at VP Bank Group. “The German government will probably come under growing pressure to give up its strict budget policy.”

Finance Minister Olaf Scholz said last week that Germany would be able to cope with an economic crisis but added that he did not expect a downturn to be as bad as it was in 2008/2009.

The government is sticking to its balanced-budget policy, despite pressure from economists and other governments to spend more to boost flagging demand.

Germany’s export-reliant manufacturers are suffering from a slowing world economy and business uncertainty linked to a trade dispute between the United States and China as well as Britain’s planned but delayed exit from the European Union, says a Reuters report.

Monday’s weaker-than-expected data adds to the sense of gloom around the German manufacturing sector.

A survey released last Tuesday showed Germany’s manufacturing recession deepened in September with factories recording their weakest performance since the world financial crisis a decade ago.

The German economy shrank by 0.1 per cent in the second quarter and recent data pointed to continued weakness in manufacturing in the third quarter.

Most economists define a period of at least two consecutive quarters of contraction as a technical recession, though that does not necessarily mean that annual growth rates will turn negative.

Last Wednesday, Germany’s leading economic institutes slashed their growth forecasts for the economy for this year and next, blaming weaker global demand for manufacturing goods and increased business uncertainty linked to trade disputes.

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