On October 7, the Federal Statistical Office of Germany reported a concerning trend in the country’s industrial sector. After adjusting for price, season, and working days, new industrial orders in Germany witnessed a dramatic 5.8% month-on-month decline in August, marking the steepest drop since January. This figure was notably lower than experts’ prior expectations of a mere 2.0% decrease.

The data reveals that domestic new orders plummeted by 10.9% in August, while foreign orders fell by 2.2%. Notably, new orders from the Eurozone dropped by 10.5%, whereas orders from outside the Eurozone managed to grow by 3.4%.

One significant factor contributing to this considerable decline, according to the Federal Statistical Office, is the downturn in the “other transport equipment manufacturing” sector, which encompasses aircraft, ships, trains, and military vehicles. This sector had experienced a surge in large orders back in July, leading to a saturation in the market.

Additionally, the office has adjusted the month-on-month increase in new industrial orders for July, revising it from 2.9% to a more substantial 3.9%.

Sebastian Dullien, the Director of the Institute for Macroeconomic and Business Cycle Research (IMK), pointed out that this drop in industrial new orders highlights the ongoing challenges in the German industrial sector. He noted that key industries, including automotive, mechanical engineering, and chemicals, are currently struggling.

Current IMK forecasts indicate that Germany’s GDP is anticipated to stagnate in 2024, with a modest growth rate of just 0.7% projected for 2025. Dullien stressed that the weak state of the industrial sector introduces further downward risks to this already bleak outlook.

In response to these trends, the Federal Ministry for Economic Affairs and Climate Action stated that following a brief rebound in industrial new orders over the previous two months, a decline has resurfaced. The fluctuating nature of large orders continues to significantly influence new industrial orders. Given the prevailing weakness in industrial demand and the negative business climate, the prospects for a substantial recovery in the industrial economy during the second half of 2024 seem quite dim.