German industrial orders hit by geopolitical concerns

6th October 2014, Comments 0 comments

German industrial orders, a key measure of demand for German-made goods both at home and abroad, fell in August, weighed down by concerns about fallout from the Ukraine crisis, data showed on Monday.

Industrial orders fell by 5.7 percent in August compared with the previous month, the statistics office Destatis said in a statement.

In July, German factory orders had jumped by 4.9 percent.

The large swing was partly due to the timing of the summer holidays, as well as the above-average number of big ticket orders in July, the statisticians said in a statement.

Domestic orders declined by 2.0 percent and export orders dropped up by as much as 8.4 percent compared with the previous month.

Orders from the eurozone contracted by 5.7 percent and orders from outside the eurozone slumped by 9.9 percent.

By sector, orders for semi-finished goods were down 3.0 percent and orders for capital goods dropped by 8.5 percent, while orders for consumer goods rose by 3.7 percent.

Berenberg Bank economist Christian Schulz attributed the bigger-than-expected drop in orders in August to "below-average bulk orders and distortions caused by late school holidays."

Nevertheless, "smoothing out these wild swings ... orders remained on a mild downtrend this summer," he said.

It "reflects the cooling of business sentiment since early spring. Geopolitical risks, especially the crisis in Eastern Ukraine, have made companies cautious about their investment plans, despite very favourable fundamental and funding conditions. Once these uncertainties fade confidence and thus investment should rebound," Schulz said.

BayernLB economist Stefan Kipar said the rise in consumer goods orders "suggest that the recovery in the euro area and in Germany hasn't ended yet. Positive growth rates can be expected in Germany in the second half of the year, even if momentum is likely to be very modest."

But Commerzbank economist Ralph Solveen was more sceptical.

"The underlying trend is also pointing downwards. This supports our expectation of a weak second half of 2014 for the German economy," he said.

© 2014 AFP

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