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ECONOMY

Industrial orders surge as economy rebounds

Demand for German manufactured goods soared 5.0 percent in March driven by both domestic demand and exports, in a further sign of recovery in Europe's top economy, provisional figures showed Thursday.

Industrial orders surge as economy rebounds
Photo: DPA

The data released by the Economy Ministry was far better than expected by economists polled by Dow Jones Newswires who had forecast a rise of just 1.0 percent following flat figures in February compared to the previous month. The ministry said the growth was seen across a “broad front.”

“That indicates a continuation and consolidation of the recovery process for industrial production,” it said in a statement.

“Business confidence indicators, which also recently improved, also point in this direction.”

The closely watched Ifo index last month showed business confidence in Germany rising sharply to a near two-year high. However retail data released Tuesday showing a 2.4-percent plunge in March raised fears that German gross domestic product had contracted in the first quarter of the year.

The data released Thursday said foreign demand for industrial products in Germany, the world’s second largest exporter after China, rose 4.7 percent in March, with even stronger growth in orders at home of 5.4 percent.

Orders from the other 15 countries in the eurozone rose 9.6 percent in March from February, while orders from beyond the currency bloc gained 1.3 percent.

Economist Alexander Koch from UniCredit Group said Europe could take heart in the data.

“The latest jump in orders from the EMU neighbour countries, which still account for the bulk of German exports, confirm that, despite the Greek debt crisis and the feared contagion to other member countries, the revival in global industrial activity remains broad based,” he said.

Demand for consumer goods, however, was weak, falling 1.9 percent in keeping with a long-term trend. Berlin has faced pressure from eurozone trade partners for policies that would boost imports from neighbours.

Analyst Carsten Brzeski of ING Bank said the figures marked an “impressive comeback.”

“After the weather-driven temporary dip at the turn of the year, at least the German manufacturing sector has picked up speed again,” he said in a statement.

“Whether the pick-up came just in time to prevent another quarter of negative growth will only become clear next week with the first GDP estimate to be released.”

Brzeski said he would also be looking to the release of March data on industrial production Friday to indicate whether Germany’s economic “hibernation” had ended.

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ECONOMY

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.

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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.

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