A big slump in international orders for German manufactured goods might not equal a slump, but it could be the start of a slowdown in that sector, analysts said, reacting to data released Tuesday.
Manufacturing orders in July declined by 2.8 per cent compared to June levels, according to the Economics Ministry.
Adjusted for variations in days worked and price changes, they showed that the biggest slowdown in orders was coming from abroad, with overall foreign orders down 7.4 per cent and those from outside the eurozone down 10.2 per cent.
“Whereas domestic orders and those from the eurozone are moving briskly, the demand from countries outside the eurozone has stagnated,” read a statement from the German Economics Ministry.
Most of that variation came from a drop in demand for big-ticket German goods - primarily those related to vehicle construction, such as planes and ships. If declines in that area are factored out, July's drop in orders would been only 0.2 per cent, it noted.
But analysts characterised the dip not so much as a decline in demand, rather a return to standard levels of orders placed after a brief spike for heavy machinery.
“The latest drop in total new orders in July is above all a technical counter reaction and, hence, some kind of a yo-yo effect which brings the so-far-inflated headline figure back to its fundamental trend,” noted Andreas Rees of Unicredit.
“There is no sign yet of a slump,” wrote Ulrike Rondorf of Commerzbank.
The real test will come when data released later in the autumn shows orders for August and September, months during which market jitters have intensified.
“Then we will know whether risk aversion spilling over from financial markets in the company sector has led to some kind of 'play it safe' pattern with the inflow of new orders from Germany and abroad drying up quickly,” wrote Rees.
Still, the news came as the European Union confirmed that quarter-on-quarter growth in the bloc had moved only 0.2 per cent in the second quarter of 2011 and that Germany's growth was a tiny 0.1 per cent.
“The upswing in industry has lost considerable momentum since the start of the year,” wrote Rondorf. “This makes much lower growth likely for the overall economy in the second half of the year compared to the first.
“Uncertainty about the future of the (eurozone) monetary union and global economic growth has risen significantly recently and the risks of an uncertainty shock have increased.”
Meanwhile, the Economics Ministry worked to accentuate the positive from the report, noting that orders for consumer goods had risen by 4.5 per cent while orders for goods needed for further production work rose by 2.9 per cent. - Sapa-dpa