Germany Factory orders plummet in August

August headline factory orders growth plunged unexpectedly in Germany by 1.8% m/m, after a downward revision in July to -2.2% m/m. Core orders (excluding volatile big-ticket orders for transportation equipment, etc) accompanied the fall in headline orders with a drop of 2.7% m/m in August (from -1.4% m/m in July). On a year-on-year basis, orders were up sharply by 2.2% compared to a 1.5% y/y contraction the previous month.

In terms of components, investment goods orders declined by 2.8% m/m in August while orders for intermediate goods edged slightly lower (-0.4% m/m). Consumer goods orders also remained in negative territory, falling by 1.5% m/m, driven by non-durables.

August numbers were not impacted by the VW scandal which could affect the leading carmaker in Germany in the coming months, although the macroeconomic impact is likely to be limited, says Barclays.

All in all, the Q3 order flows are shaping up to be much weaker than the PMI or IFO business surveys have indicated. According to business surveys, solid order books should result in a strong performance from Germany's industrial sector in the second half of this year, but today's release casts doubts on the sustainability of the current growth phase given the ongoing weakness in the global economy. 

"We still expect further strength in other euro area countries and Northern Europe, together with further support from domestic demand, to offset the downward pressure from EM and China and we hold to our view that Germany should continue to grow at a 1.5% annualised pace in the coming quarters", added Barclays.