- Title: GERMANY-ECONOMY/ORDERS German industry orders fall on weak non-euro zone demand
- Date: 6th October 2015
- Summary: GERMANY (FILE) (REUTERS) VARIOUS OF EBM PAPST FACTORY PRODUCTION LINE
- Embargoed: 21st October 2015 13:00
- Keywords:
- Topics: General
- Reuters ID: LVABRMGR6CU87FJRMPDSAEZ76N9U
- Aspect Ratio: 16:9
- Story Text: German industrial orders fell unexpectedly in August as demand from non-euro zone countries weakened, raising worries a slowdown in China will cut into exports from Europe's biggest economy.
Contracts for German goods declined by 1.8 percent on the month, said the economy ministry. A Reuters poll had forecast a rise of 0.5 percent.
The data enhances a picture of waning demand from abroad, especially China and other emerging markets. That suggests the strong exports that supported growth in the first half could lose momentum.
German factories got 1.2 percent fewer bookings from abroad, driven by a 3.7 percent slide in demand from countries outside the euro zone.
"There's no doubt that the downturn in China and elsewhere in Asia and Latin America is having an impact. And to the extent that Germany has been the world's manufacturer of choice, and especially of premium products, then I think Germany is going to being to see some of the effect of that tailwind turning into very much of a headwind. And that of course is before we even begin to take into account the recent reputational scandals", said National Australia Bank's Head of Markets Strategy Nick Parsons.
The economy ministry said a 2.6 percent fall in domestic demand was due partly to holidays. Euro zone demand was "clearly pointing upwards", it said, while the non-euro zone "seems to be less reliable at the moment".
Recent data has been encouraging, with retail sales posting their strongest increase from January to August in more than 20 years, although private-sector growth lost some speed last month. Business morale unexpectedly rose for the third month in a row in September.
Economists have warned, however, that exports may falter further as the Volkswagen emissions scandal puts the 'Made in Germany' brand under threat.
"I don't think it's under threat terminally but it's certainly tainted in the very short term. Germany if it stood for anything it was quality and integrity. Now the quality is undoubted, it's the integrity where there are question marks. And it'll be interesting to see the extent to which customers really do care about that or whether they just want the quality, whatever the price, and to hell with the consequences" said Parsons.
Volkswagen shares fell around 3 percent in early trading after Handelsblatt reported that VW had admitted 8 million vehicles were fitted with software capable of cheating diesel emissions tests in the European Union. Its sales in South Korea also fell. Mike Ingram, Market Strategist at BGC Partners, says the extent of the damage to Brand Germany will be shown by the orders of other auto producers.
"Both Daimler and BMW are due to release their numbers over the next four weeks and I'm sure that analysts will be asking them some very searching questions in that regard. And we better make sure that they've got some pretty good answers and, bearing in mind what's happened with VW, some very truthful answers would be helpful."
So far, strong demand from the United States and a recovery in some euro zone countries have helped German companies to compensate for weaker sales to China and other emerging markets.
The German government has confirmed its forecast of 1.8 percent growth in 2015 after an expansion of 1.6 percent in 2014.
The data for July was revised down to a 2.2 percent drop from an originally reported 1.4 percent decline. - Copyright Holder: FILE REUTERS (CAN SELL)
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