Germany’s industry orders fall wider than market estimates; economic output unlikely to accelerate significantly

Germany’s industry orders fell by 0.6 percent during the month of August compared to that in July, which is more than expected. Leading indicators such as Ifo expectations also indicate that the downward trend in German industry is likely to continue.

The fact that at the same time German carmakers are increasingly moving production abroad does not make it any easier for the domestic economy.

Today's figures continue the trend of recent months. The August figure is even likely to be too friendly about the actual situation. Because of the early situation of the summer holidays, August 2019 had more working days than the average of recent years which lifts business activity, according to the latest research report from Commerzbank.

Early indicators suggest that the mood among German entrepreneurs has continued to deteriorate. Concerning the ifo business climate, expectations for the coming six months have fallen further (from 91.3 to 90.8). In addition, the purchasing managers' indices for Germany's industry and services sector fell unexpectedly sharply in September.

In addition, there are structural factors that are increasingly weighing on the German economy. Not least because of the erosion of Germany as business location, German automobile manufacturers are relocating more and more production abroad with the consequence - typical for the automotive sector - that important supplier industries such as chemicals are also moving abroad, the report added.

"So it won't become any easier for the German economy. A technical recession is looming for the third quarter, and even towards the end of the year it is unlikely that economic output will accelerate significantly," Commerzbank further commented in the report.