German factory orders drop 5.7 per cent on the month in August, cancelling out previous rise

BERLIN – German factory orders dropped sharply in August, led by a big drop in demand from abroad and cancelling out a large rise the previous month, official data showed Monday.

Orders in Europe’s biggest economy were down 5.7 per cent compared with the previous month, the Economy Ministry said, a significantly worse showing than the 2.5 per cent drop economist had predicted.

The ministry said big-ticket orders were slightly below average and demand was hit by the timing of school vacations in Germany, but conceded that demand was weakened by the “hesitant economic development” of the 18-nation eurozone and uncertainty caused by “geopolitical events” — shorthand for crises in Ukraine and the Middle East.

The previous month’s data had sent a positive signal, with orders rising 4.9 per cent in July following two more modest drops.

“Besides technical factors largely causing this enormous swing … we think that the first signs of fundamental weakness have arrived in the German manufacturing sector,” said Andreas Rees, an economist at UniCredit.

A closely watched survey of German business confidence has declined for the past five months amid fears caused by the persistent turmoil in Ukraine and sluggish growth in Europe and China.

The drop in August was led by a 9.9 per cent fall in orders from outside the eurozone, followed by a 5.7 per cent decline in demand from other countries in the eurozone. Domestic orders were down 2 per cent.