Bad news for the German industry: Incoming orders continue to fall

Geopolitical uncertainties and the effects of the trade conflict between the USA and China are causing a cooling of world trade, which especially the export-dependent industrial companies in Germany cannot escape. After all, they generate around 50% of their sales abroad. In the automotive industry, mechanical engineering and the chemical industry, the figure even exceeds 60%. Accordingly, incoming orders fell further in July, falling by 5.6 percent year-on-year.

In the first seven months of this year, orders declined in all major segments of the manufacturing industry. The global economic slowdown is thus no longer merely causing weakness in export-dependent industries. As companies in these sectors are themselves placing fewer orders due to lower capacity utilization, domestic demand is now also being depressed.

Demand from non-euro countries had calmed down somewhat in the second quarter. Exports from Germany to the USA increased by 4.3% in the first half of the year, well above average. Total German exports of goods grew by „only“ 0.5% in the same period. In addition to the solid growth of the US economy, this is probably due to a shift in demand there from Chinese products to goods from other countries. As a result, some companies will be able to offset part of their losses from other regions. However, orders from non-euro countries fell again particularly sharply in July. In addition, the Damocles sword of US punitive tariffs on European cars still hovers over German and European companies.

In view of this development, it is not surprising that capacity utilization in the manufacturing sector has been falling steadily since the summer of 2018. It is now around 84% and thus only roughly at the level of its long-term average. The fact that this development was not even significantly more negative is mainly due to the still comparatively solid order backlog.

 

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