German industrial orders continue six-month slide

German industrial orders fell in May for the sixth month in a row, official figures showed Friday, prompting analysts to voice alarm and declare an end to a vital boom in the manufacturing sector.

Orders fell by 0.9 percent in May from the previous month in Europe’s biggest economy, according to provisional and seasonally corrected figures released by the economy ministry. Analysts polled by Dow Jones Newswires had expected the leading indicator to gain 0.8 percent.

The decline was nonetheless an improvement from April, when industrial orders fell by 1.8 percent on a monthly basis. But for Natixis analyst Costa Brunner, the latest decline “is definitely an alarming sign for the German industry and the economy as a whole.”

Postbank’s Fabienne Riefer said the German industrial sector’s “best days are behind it,” while Matthias Rubisch at Commerzbank declared: “The boom in the manufacturing sector is over.”

Germany, which is also the world’s leading exporter at present, has resisted a slowdown seen in other eurozone countries and the United States but is now headed for a patch of much weaker growth. “Western Europe now follows the US into a marked downturn,” Rubisch said. For Brunner, the order data underscored “an accelerating risk to the cooling down of important trading partners.”

But while domestic orders fell by 2.7 percent in May, foreign demand grew by 0.8 percent, a ministry statement said. German industrial production figures are expected on Monday, and Rubish said that “no more than a stagnation of manufacturing output can be expected for the rest of the year.”

On Wednesday, the German retail federation HDE cut its 2008 forecast for domestic consumption growth to 1.5 percent after first-half results came in lower than expected.

It was one of a number of increasing signs that an anticipated pickup this year in German consumption and domestic investment would not occur. Exports have still managed to hold up however, and German companies report their foreign order books are still fairly full. Even so, Rubisch forecast: “From now on only moderate GDP growth can be expected.”


German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.