German industrial orders rebound thanks to strong foreign demand

A worker at the Volkswagen assembly line in Wolfsburg, Germany. Reuters

Higher demand from abroad led to a larger-than-expected rebound in German industrial orders in November, rare good news for manufacturers suffering from bottlenecks and labor shortages in the larger economy. from Europe.

Goods orders rose 3.7% on the month in seasonally adjusted terms after a revised 5.8% drop in October, figures from the Federal Statistical Office showed on Thursday. A Reuters poll of analysts had indicated an increase of 2.1%.

This increase is due to a sharp increase in foreign demand for capital goods and intermediate goods, orders from other euro area countries jumping 13.1% and reservations from customers outside the currency bloc up 5 %.

“This gives a positive boost to the economic outlook, although economic activity continues to be weighed down by existing delivery bottlenecks,” the economy ministry said.

Unlike in previous months, orders for big ticket items such as airplanes did not have a big impact on the overall figure in November. Excluding this special factor, industrial orders rose 3.8% on the month, the ministry said.

“The upturn in overseas business is particularly encouraging, especially as delivery bottlenecks appear to be easing,” said Alexander Krueger, analyst at private bank Hauck Aufhaeuser Lampe.

But Krueger warned that supply chain issues will likely persist until spring, until delivery logistics run more smoothly again.

Economic institutes expect the German economy to contract in the last three months of 2021 and stagnate in the first three months of 2022, delaying the recovery from the COVID-19 pandemic.

In the medium term, the business outlook for companies manufacturing industrial machinery looks promising in light of the transition to a greener and more digital economy.

“The ecological restructuring of industry and the wave of digitization is good news for German industry,” said Bank Vice-President economist Thomas Gitzel.

Government plans to increase public spending and support private investment in expanding renewable energy sources and reducing carbon emissions through green hydrogen will give engineering companies a boost, Thomas Gitzel said.

“Despite short-term setbacks, order books will remain well filled for years to come,” added Thomas Gitzel.

Inflation: Consumer price inflation rose in several German states in December, regional data showed Thursday, indicating an unexpected increase in the nationwide inflation figure.

Preliminary data from North Rhine-Westphalia, Germany’s most populous state, showed annual consumer price inflation (CPI) accelerated to 5.2% from 5.1% the preceding month.

It also increased in the western state of Hesse to 5.4% from 5.3% and in the eastern state of Saxony to 5.1% from 5.0%.

In Brandenburg it remained unchanged at 5.7%.

Pan-German inflation figures for Europe’s largest economy are due later Thursday (13:00 GMT).

Analysts polled by Reuters predicted the nationwide CPI figure would rise to 5.1% in December, from 5.2% the month before. The EU’s harmonized inflation rate (HICP) is expected to fall to 5.7% from 6.0% in November.

Dekabank analyst Kristian Toedtmann said regional data suggested the Pan-German CPI figure would rise relative to market expectations, while the EU-harmonized figure would likely decline as expected.

“There is some decline in energy costs, but there are price increases in other areas such as clothing,” Toedtmann said.

Service providers such as restaurants, hotels, cinemas and fitness studios increased their prices in December, although this is unlikely to continue given renewed restrictions to slow the spread of the coronavirus, added. Toedtmann.

“In the near future, inflation in Germany is likely to slow down,” Toedtmann said.

Meanwhile, new German passenger car registrations in 2021 fell 10% year-on-year to around 2.62 million vehicles, a source told Reuters on Wednesday, as the chip shortage hampered production around the world. .

New passenger car registrations in December 2021 fell 27% to 228,000, the source said, slightly less severe than the 32% drop in November but even worse than the fall in markets like Italy and Spain .

Automakers including Daimler have said they expect the chip scarcity to continue into 2022. Nonetheless, German Auto Importers Association VDIK predicted sales will pick up this year, increasing 15% to around 3 million. vehicles.

The KBA auto authority is due to release official sales figures later Wednesday.

The German 10-year bond yield moved closer to positive yield territory on Thursday, just as eurozone borrowing costs hit new highs amid the hawkish tone of the US Federal Reserve and new highs. signs of rising German inflation. The Italian 10-year bond yield was 5 basis points higher at 1.29%, after hitting its highest level since July 2020 at 1.31%.

Most of the money block’s other 10-year bond yields rose 4 basis points on the day and reached or near multi-month highs, reflecting a sell-off in global bond markets led by US Treasuries.

In Germany, the yield on the 10-year Bund, which was rolled over to a new benchmark, fell to -0.033%, its highest level since May 2019, according to data from Refinitiv.

Analysts said that although the rollover in a new contract made the movement of Bund yields appear large, even if measured on a continuous basis, yields were hitting new highs over several months.

And trading under the new benchmark puts German 10-year yields a striking distance of 0% – a level it last exceeded in May 2019.

James R. Rhodes