German factory orders fell the most since the pandemic as manufacturing continued to fare worse than other parts of Europe’s largest economy.
(Bloomberg) — German factory orders fell the most since the pandemic as manufacturing continued to fare worse than other parts of Europe’s largest economy.
Demand declined 10.7% in March, more than estimated by a single economists in a Bloomberg poll that predicted a 2.3% drop. The slump was particularly pronounced in the car and car parts industry.
Manufacturers have been relying on a large cushion of orders to sustain production as bottlenecks that emerged during the Covid pandemic disappear. Services have been doing better recently amid robust demand from consumers.
It appears that rapid increases in interest rates around the world are weighing on demand for German industrial goods, said Ralph Solveen, an economist at Commerzbank AG, adding that production will suffer as the backlog of work shrinks.
“This clearly speaks against the economic rebound that many forecasts are predicting in the second half of the year,” he said in a note to clients. “On the contrary, the risk of recession is rising.”
Germany avoided a recession over the winter, though flat output in the first quarter disappointed economists who had anticipated a rebound.
European Central Bank President Christine Lagarde also said Thursday that “prospects are worsening” for manufacturers in the euro zone amid a “divergence across sectors of the economy.”
That chimes with surveys by S&P Global, which have showed activity accelerating in Germany’s services industry, while factories slowed down amid waning demand.
BMW AG cautioned on Thursday that the global economic and political outlook remains uncertain and tense. That view has echoed across the industry recently by competitors including Volkswagen AG and Mercedes-Benz Group AG.
–With assistance from Joel Rinneby and Kristian Siedenburg.
(Updates with comment from Commerzbank from fourth paragraph.)
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