German Industrial Orders Decline 4th Month, Analysts Expected a rebound
The number of new orders had fallen compared to the previous month by 2.5 percent, the Federal Statistical Office said. Analysts were surprised by the April data. They had expected a recovery and had expected a rise in order intake of 0.8 percent.
"This is another cold shower for the German industry and raises doubts about the strength of the economy," says Carsten Brzeski, chief economist Germany at ING.
Normally, after three months of declines, orders would always pick up again. "It is becoming increasingly difficult to explain the decline with special factors." Apparently, the weak start to the year of the German economy is more serious than previously thought, Brzeski warned.
"The fear of a trade war with America and the political chaos in Italy has clouded the mood of the players, but I would not have expected it to be translated as fast into the hard data as new orders," says Jens Kramer, economist at NordLB. "So far, we have always expected growth to accelerate again. But we have to think that over now. "
Three Month Rule
Whenever orders in German industry fell more than three months, there were clear signs of a slowdown in gross domestic product (GDP). In 2011, GDP growth collapsed in the fourth quarter. In 2012, economic output even shrank for a quarter.
- Domestic: -4.8 percent month-on-month
- Eurozone: -9.9 percent month-on-month.
- Rest of World: Orders +5.4 percent month-on-month.
Some of that rest of the world jump is a result of China turning towards Europe in the trade feud with the US. It won't last.
Eurozone in Trouble
The Eurozone is in trouble. Germany is in deeper trouble, overinvested in diesel and engine technology that is set to become useless. Also note that 5,000 German corporations were hit by Trump's Iran sanctions.
For further discussion, please see What's Trump's Real Trade Target: China or Europe?
To top it off, Trump threatens to eliminate German luxury car imports.
Precisely why did economists expect a rebound?
The ECB will soon backpedal on its bond tapering program.
Mike "Mish" Shedlock