German factory orders fall sharply in April, industrial production likely to have fallen sharply as well

German manufacturing order intake fell sharply in April, as was widely anticipated. Orders collapsed 25.8 percent sequentially. On a year-on-year basis, factory orders fell 36.6 percent. Unsurprisingly, the automotive industry was impacted especially hard, recording a fall of 43 percent, partially because of the fact that car dealers’ showrooms were closed for much of the month. With the exception of other vehicles, orders in all other sectors dropped less than average. As expected, pharmaceutical industry was the least impacted, with a fall of 6.6 percent.

Domestic orders dropped 22.6 percent, slightly smaller than the fall of 28.6 percent in orders from abroad. Here orders from the euro area came in especially soft. The production figures, which are set to be release early next week, are expected to indicate a similar fall.

“We expect industrial production to have fallen by 20 percent, in line with the more than 22 percent drop in real industrial sales reported today”, said Commerzbank.

Several indicators imply that the German economy has started to rebound in May from the slump seen in March and April. According to the VDA, for instance, the number of cars manufactured in Germany was back to nearly 40 percent of last year’s average level, whereas practically no cars were manufactured in April.

“However, industrial orders are expected to rise at most slightly compared to April, which is also indicated by surveys among companies. For example, the order component of the PMI rose only slightly in May and the corresponding figure for the Ifo Business Climate even fell again. Weak demand in other euro countries, in particular, will be a drag. In these countries, the lockdown measures were often eased later and more slowly than in Germany”, added Commerzbank.