German Industrial Orders Fall More Than Expected in August

A worker wears a protective mask at the Volkswagen assembly line after VW re-starts Europe's largest car factory after coronavirus shutdown in Wolfsburg, Germany on April 27, 2020. (Swen Pfoertner/Pool via Reuters)

BERLIN—German industrial orders fell more than expected in August on weaker demand from abroad following two months of unusually strong gains due to major contracts, data showed on Wednesday.

The figures published by the Federal Statistics Office showed orders for goods ‘Made in Germany’ were down by 7.7 percent on the month in seasonally adjusted terms. A Reuters poll of analysts had pointed to a drop of 2.1 percent on the month.

German car companies are struggling to meet a post-pandemic surge in demand since the start of the year due to a lack of microchips and other intermediate products which is holding back the recovery of Europe’s largest economy.

The steep drop on the month was partly caused by previous orders for planes, ships, and other large vehicles which had pushed up orders by 4.9 percent in July and 4.6 percent in June, the office said.

Without this distorting effect, industrial orders were down by 5.1 percent in August.

Another reason for the weaker-than-expected headline figure was lower demand from abroad, especially from clients outside the euro zone area.

The economy ministry also pointed to an unusually strong decline in orders for cars which is partly linked to special holiday effects in some regions with large automobile factories.

Nonetheless, overall industrial orders remained at a historically high level and were already 8.5 percent above their pre-crisis levels of February 2020, the month before Germany was hit by the COVID-19 pandemic, the ministry said.

“The result is a shock at first glance, but given the overall high level, it hurts less than in normal times,” Bankhaus Lampe economist Alexander Krueger said.

The main problem in German manufacturing is still the lack of semiconductors and other intermediate products as the supply chain problems still prevent orders from being processed.

“Order cancellations will therefore tend to increase. With no easing of the supply bottlenecks in sight, industry will continue to suffer,” Krueger added. “Industry will continue to be a drag on growth in the fourth quarter.”