German industrial orders bounce back on strong foreign demand


A worker at the Volkswagen assembly line in Wolfsburg, Germany. Reuters

Higher demand from abroad drove a bigger-than-expected rebound in German industrial orders in November, in rare good news for manufacturers suffering from supply bottlenecks and labour shortages in Europe’s largest economy.

Goods orders rose 3.7 per cent on the month in seasonally adjusted terms after a revised drop of 5.8 per cent in October, figures from the Federal Statistics Office showed on Thursday. A Reuters poll of analysts had pointed to a 2.1 per cent rise.

The rise was driven by a surge in foreign demand for capital and intermediate goods, with orders from other eurozone countries jumping 13.1 per cent and bookings from clients outside the single currency bloc up 5 per cent.

“This provides a positive impetus for the economic outlook, although economic activity continues to be burdened by existing delivery bottlenecks,” the economy ministry said.

In contrast to previous months, orders for large-ticket items such as planes did not have a big impact on the headline figure in November. Excluding this special factor, industrial orders rose 3.8 per cent on the month, the ministry said.

“The upturn in foreign business is particularly encouraging, especially since delivery bottlenecks seem to be easing,” said Alexander Krueger, an analyst with private bank Hauck Aufhaeuser Lampe.

But Krueger cautioned that supply chain problems would likely persist well into spring, until delivery logistics functioned more smoothly again.

Economic institutes expect the German economy to have shrunk in the final three months of 2021 and to stagnate in the first three months of 2022, delaying the recovery from the COVID-19 pandemic.

In the medium term, business prospects for companies manufacturing industrial machinery look bright in light of the shift towards a greener and more digitalised economy.

“The ecological restructuring of industry and the wave of digitisation are good news for German manufacturing,” VP Bank economist Thomas Gitzel said.

The government’s plans to hike public spending and support private investments in the expansion of renewable energy sources and the reduction of carbon emissions through green hydrogen will give engineering companies a push, Thomas Gitzel said.

“Despite short-term setbacks, the order books will remain well filled for the coming years,” Thomas Gitzel added.

Inflation: Consumer price inflation rose in several German states in December, regional data showed on Thursday, pointing to an unexpected increase in the nationwide inflation figure.

Preliminary data from North-Rhine Westphalia, Germany’s most populous state, showed that annual consumer price inflation (CPI) accelerated to 5.2 per cent from 5.1 per cent in the previous month.

It also picked up in the western state of Hesse to 5.4 per cent from 5.3 per cent and in the eastern state of Saxony to 5.1 per cent from 5.0 per cent.

In Brandenburg, it remained unchanged at 5.7 per cent.

The pan-German inflation figures for Europe’s largest economy are due later on Thursday (1300 GMT).

Analysts polled by Reuters have predicted the nationwide CPI figure will ease to 5.1 per cent in December from 5.2 per cent the previous month. The EU-harmonised inflation figure (HICP) is projected to fall to 5.7 per cent from 6.0 per cent in November.

Dekabank analyst Kristian Toedtmann said the regional data suggested that the pan-German CPI figure would rise against market expectations whereas the EU-harmonised figure would probably ease in line with the forecast.

“There is some easing in the costs for energy, but there are price increases in other areas such as clothing,” Toedtmann said.

Service providers such as restaurants, hotels, cinemas and fitness studios increased their prices in December, though this is unlikely to continue given renewed restrictions to slow the spread of the coronavirus, Toedtmann added.

“In the near future, inflation in Germany will probably slow,” Toedtmann said.

Meanwhile the German new passenger car registrations in 2021 fell 10 per cent year-on-year to around 2.62 million vehicles, a source told Reuters on Wednesday, as chip shortages hampered production worldwide.

New passenger car registrations in December 2021 fell 27 per cent to 228,000, the source said, slightly less severe than the 32% dip registered in November but still worse than the fall in markets including Italy and Spain.

Carmakers including Daimler have said they expect chip scarcity to last well in 2022. Still, German auto importers association VDIK predicted sales would recover this year, rising 15 per cent to around 3 million vehicles.

Car authority KBA is due to publish official sales figures later on Wednesday.

Germany’s 10-year bond yield lurched closer to positive yield territory on Thursday, just as borrowing costs across the euro area hit new highs in the face of a hawkish tone from the US Federal Reserve and fresh signs of rising German inflation. Italy’s 10-year bond yield was 5 basis points higher on the day at 1.29 per cent, having jumped to its highest level since July 2020 at 1.31 per cent.

Most other 10-year bond yields in the currency bloc were up 4 bps on the day and at or near multi-month highs, reflecting a broader sell-off in global bond markets led by US Treasuries.

In Germany, the yield on 10-year Bunds, which rolled over into a new benchmark, rose to -0.033%, its highest level since May 2019, according to Refinitiv data.

Analysts said that while the rollover into a new contract made the move in Bund yields appear large, even if measured on a continuous basis, yields were at new multi-month highs.

And trading under the new benchmark puts German 10-year yields within striking distance of 0% – a level it last traded above in May 2019.


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