New orders, closely watched as a foretaste of future industrial activity, declined 0.4 per cent in April compared with the previous month, federal statistics agency Destatis said.
The drop surprised analysts surveyed by FactSet who had predicted a four-percent increase. It comes after orders plummeted 10.9-per cent in March, the biggest fall since April 2020 when the coronavirus pandemic forced widespread lockdowns.
The disappointing April figure was mainly down to a drop in large orders, the economy ministry said in a statement. Excluding them, new orders actually increased by 1.4 per cent.
But the ministry acknowledged that German industry lacked momentum at the beginning of the second quarter.
“Germany’s export-oriented economy is suffering particularly from the still weak global economy and the decline in orders from the euro area,” it said.The slowdown was especially noticeable in machinery and equipment manufacturing were orders were down six percent month-on-month, while “miscellaneous vehicle construction” including ships, trains and aircraft saw a 34-percent plunge.The motor vehicle and electrical equipment sectors on the other hand registered increases in new orders in April.
After weathering the initial fallout from Russia’s war in Ukraine and the resulting surge in energy prices better than feared, the picture for the German economy has darkened in recent months.
Two consecutive quarters of economic contraction at the end of 2022 and the start of 2023 have plunged Germany into recession, as inflation and higher interest rates weighed on demand.
A relatively high order backlog may continue to support German industry “for a few months”, Commerzbank economists said in a note.
But the second half of the year could see “a significant decline”, they warned.
“Industry is then likely to play a major role in causing the German economy to contract again.”
The German government has forecast economic growth of 0.4 percent overall in 2023.
