German headline factory orders declined at a faster pace in Dec, but overall Q4 quarterly growth remained robust

German December headline factory orders declined by 0.7% over the month; at a steeper pace than anticipated. The decline comes after two months of consecutive gains. However, core orders rose by 0.9% m/m (vs. +0.4% m/m in November). Also, the overall quarterly growth in Q4 remained in positive territory at 1.0% q/q, following a disappointing -2.7% q/q in Q3.

All in all, factory orders are showing a slight weakness in German industry towards year end. While domestic demand for investment and intermediate goods declined, domestic consumer goods orders remained robust in Q4 (+1.9% q/q). Domestic consumer goods numbers were probably supported further by additional spending as a result of the high inflow of refugees into Germany.

It should be noted that factory orders is a volatile series, and hence further development, in particular in domestic orders, will likely be closely observed. As for now, Q4 reading is likely to contribute positively to industrial production in the following quarter.