Germany is facing a huge shift in all manufacturing order sectors – an unexpected drop which is most likely connected to the unclear future of transatlantic trade.
German factory orders dropped below any analysts expectations in June, the Financial Times reports. German Federal Statistical Office (Destatis) had counted a more than 4% fall — a dramatic downturn since a 2.8% rise in May. While most credible analysts had predicted no more than sag of 0.4%, the current collapse is the biggest since January 2017.
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Carten Brzeski, chief economist at ING Germany noticed that “the June report could be a tentative sign of how trade tensions are hitting the German economy.” The statistics showing the ongoing decline of orders for German manufacturing covers the period when trade relations between the US and the European Union were worsening, before the meeting between US President Donald Trump and European Commission President Jean-Claude Juncker in July. The meeting permitted the establishment of new boundaries in transatlantic trade and reforming of the World Trade Organization, yet the effects of Trump’s trade war on the German economy appear to be devastating.
The uneasy path to negotiations with the US has resulted in a great decline in foreign orders — 4.7%. The biggest fall was seen among the countries outside the Eurozone: 5.9% compared to the drop in new orders from Eurozone countries of 2.7%. Domestic orders have also fallen by 2.7%, showing the German economy had taken a big hit internally as well.
Germany’s Economy Ministry announced on Monday that industrial orders fell by 1.6% from April to June, saying that “uncertainty caused by trade policy probably played a role.” Marc Ostwald, ADM Investor Services official believes that “the fact that every single category fell — be that domestic, Eurozone & Non-Eurozone or Capital Goods, Consumer Durables or Intermediate Goods — looks to be highly anomalous.” He compares it to the financial crisis of 2008, suggesting that either Germany will bounce back in July or today’s data might not be entirely correct.