In December, German industry recorded the largest increase in orders in over three years.
However, experts and companies do not yet see this as a serious trend reversal.
Berlin - German industry surprisingly recorded the highest order growth in around three and a half years in December due to strong demand for aircraft.
New business increased by 8.9 percent compared to the previous month, as the Federal Statistical Office announced on Tuesday.
Economists surveyed by the Reuters news agency had only expected stagnation.
The strongest increase since June 2020 can be attributed to an unusually large number of large orders in a number of industries.
“In particular, an exceptional number of aircraft were ordered,” it said.
Without these effects, orders would have fallen by 2.2 percent.
“A number like a late New Year’s Eve firecracker,” said LBBW economist Jens Oliver Niklasch, commenting on the unexpected development.
“You couldn't have expected that.” However, not everything that glitters is gold.
“Production is being kept afloat thanks to large orders,” said the chief economist at Hauck Aufhäuser Lamp Privatbank, Alexander Krüger.
“The fact that there isn’t much going on without major orders underlines the underlying weakness of the industry.” ING chief economist Carsten Brzeski also advises taking the data “with a big pinch of salt, despite the initial enthusiasm.”
Not good prospects
The German Chamber of Commerce and Industry (DIHK) also sees no reason for euphoria.
“Unfortunately, the increase in December is not yet a trend reversal,” said DIHK economic expert Jupp Zenzen.
The industry is feeling the effects of both the weak domestic economy and the continuing difficult global economic environment in its order books.
There were also structural concerns such as high energy costs and bureaucratic burdens.
“These are not good prospects for the current year,” said Zenzen.
Domestic orders rose by 9.4 percent in December compared to the previous month.
Foreign demand increased by 8.5 percent.
A large part of the overall positive development can be attributed to the area of other vehicle construction (aircraft, ships, trains, etc.): Here, incoming orders in December were more than twice as high (+110.9 percent) as in the previous month.
There may be arms deals behind this, said ING expert Brzeski.
In addition, large orders in the areas of manufacturing metal products (+18.0 percent) and in the producers of electrical equipment (+38.7 percent) had a positive effect.
However, new business declined in the important areas of the automotive industry (-14.7 percent), mechanical engineering (-5.3 percent) and the chemical industry (-3.7 percent).
“Order backlogs are melting
In the fourth quarter of 2023, total incoming orders were only 0.1 percent higher than in the previous three months, despite the strong December.
In 2023 as a whole, it was 5.9 percent lower than in 2022, because the weak global economy and high interest rates are putting a strain on demand for goods “Made in Germany”.
“If you look at the longer-term trend, the order situation in German industry has continued to decline over the last two years,” said ING expert Brzeski.
“Many more positive data are needed to signal a significant recovery in the economy.”
The Ifo Institute attests that the industry is experiencing a lack of orders, which is increasingly threatening to become a burden on the German economy.
In January, 36.9 percent of industrial companies reported a lack of orders, as the Munich researchers found in their monthly survey.
For comparison: a year earlier the proportion was only 20.9 percent.
“The lack of orders has noticeably worsened in the last year.
Hardly any industry is spared from this,” said the head of the Ifo surveys, Klaus Wohlrabe.
“In addition, the order backlog is melting.”
The development of income also shows that the situation is difficult.
Inflation-adjusted sales in the manufacturing sector fell again in December, albeit only by 0.1 percent compared to the previous month.
For 2023 overall there is a mini-plus of 0.3 percent.
(Reuters, lf)