News Column

German Industrial Orders Plummet as Demand Shrinks

Nov. 6, 2012

Andrew McCathie, dpa

volkswagen factory

Industrial orders in Germany fell sharply in September as demand from the eurozone plunged and the world economy slowed, data released Tuesday showed.

The data adds to the evidence that German growth is losing momentum after it managed to weather the economic fallout from the eurozone debt crisis during the first half of the year.

The Ministry for Economics said factory orders fell 3.3 per cent in September, adding to signs of a slowdown in Europe's biggest economy. The decline followed a 0.8-per-cent drop in August.

Analysts had expected the September data to show factory orders declining by 0.4 per cent.

Releasing the data, the ministry pointed to the weak state of the 17-member eurozone economy and slack global demand as the key factors behind the fall in orders.

"It is therefore likely that industrial production will continue to weaken in the coming months," it said.

Year-on-year, order books shrunk by 4.7 per cent during the three months to end of September when compared with the same period last year, the ministry said. Orders fell 2.3 per cent in the third quarter from the second, it said.

Leading the September monthly drop was a 9.6-per-cent fall in orders from the eurozone, which has been hit by recession and fiscal austerity.

Orders also fell by 1.5 per cent from nations outside the eurozone. This resulted in total foreign orders falling by 4.5 per cent. Total domestic orders declined by 1.8 per cent, the ministry said.

In line with a series of forecasts by private economists, the German government last month slashed its growth outlook for next year.

Berlin now expects the nation's economy to expand by 1 per cent in 2013 - down from its forecast earlier this year of a 1.6-per-cent expansion rate.

"It is becoming more likely that the German economy will shrink in the fourth quarter," said Commerzbank economist Ralph Solveen.

The release of the order book data coincided with signs that the eurozone slipped deeper into recession during October.

The London-based Markit economic research group said its composite purchasing managers' index (PMI) for the eurozone's manufacturing and service sectors fell to 45.7 points last month from 46.1 in September. A reading below 50 indicates contraction.

The fall came after Germany's PMI slumped to a two-month low of 47.7 in October.

"The downturn is still widespread, with all of the big-four (eurozone) economies seeing output decline in October," said Rob Dobson, senior economist at Markit.

"Signs that the contraction in Germany gathered pace are particularly disappointing, given the important role a strong performing Germany could play in stimulating growth elsewhere in the currency zone," he said.

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

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