Incoming Orders/Industrial Production
Orders returning to upward trend
Preliminary data indicate that incoming orders for German industry rose by 0.6 percent (after inflation, calendar and seasonal adjustments) from April 2012 to May 2012 after falling by 1.4 percent in April 2012. Demand for large orders was below average in both months. A less volatile two-months comparison between April/May and February/March also shows that incoming orders for the industrial sector rose by a slight 0.4 percent. The two-months comparison shows that domestic orders rose 0.6 percent and foreign orders rose 0.2 percent. Foreign orders from non-eurozone countries declined 1.4 percent, whereas orders from eurozone countries showed an unexpected increase of 3.0 percent.
Among the main groups of industrial goods, intermediate goods were again in great demand in May 2012 (0.8 percent higher than the previous month), after having already climbed by 1.3 percent in April. The increase was primarily due to
foreign orders (up 2.4 percent); domestic orders were down slightly in May (-0.4 percent). Up 3.1 percent, eurozone demand was surprisingly stronger than demand from non-eurozone countries. The adjusted two-months comparison shows that demand for intermediate goods rose by 0.9 percent versus the previous period. Domestic demand was up 1.6 percent, much more than foreign demand (up 0.1 percent). The two-months comparison also shows the stronger demand to be coming from the eurozone.
Demand for capital goods edged up in May 2012 by a seasonally adjusted 0.2 percent over the month before. It had fallen by 2.9 percent in April 2012. Again, foreign clients were the ones driving demand for capital goods, with foreign demand increasing 1.6 percent as a whole and 11 percent in the euro-
zone. Domestic demand slid by 2.0 percent. A two-months comparison shows the index slipped slightly in May (down 0.1 percent). The eurozone provided a surprise in the area of demand for capital goods as well, where it rose by 3.1 percent in a two-
Demand for consumer goods rose by 3.5 percent in May after tumbling 4.5 percent the month before. The improvement was mostly due to a 10.9 percent jump in demand from the euro-
zone. Non-eurozone demand for consumer goods rose just 6.2 percent. Domestic demand fell again in May, down 2.3 percent after sliding 0.9 percent in April. A two-months comparison gives a similar picture. While eurozone demand rose 6.7 percent from February/March to April/May 2012, demand from countries outside the eurozone fell by 1.7 percent in the same period, and domestic demand dropped 1.5 percent.
Production proving to be stable
Industrial production remains at a high level. Preliminary data show it rose 1.6 percent from April to May (after inflation, calendar and seasonal adjustments) after falling 2.1 percent a month earlier. Manufacturing was up 1.8 percent in May. Growth was strongest in consumer goods (up 3.8 percent), followed by capital goods (up 1.7 percent) and intermediate goods (up 1.0 percent). The construction sector also showed a big jump in May, up 3.1 percent. Energy production, on the other hand, fell by 1.6 percent.
A less-volatile two-months comparison between April/May and February/March shows that manufacturing dropped slightly, down 0.9 percent. Capital goods production fell the most, down 2.2 percent. Production of consumer goods was down 0.5 percent, while production of intermediate goods edged up 0.3 percent. The construction sector provided much-needed support, rising by 7.0 percent. Overall though, industrial production remained lower in May than it had been in the previous period (down 0.3 percent).
The business climate seriously deteriorated in the manufacturing sector in July 2012. The manufacturing companies surveyed for the ifo economic assessment were far more pessi-
mistic about their current business situation than they had been in June, when the survey revealed a slight improvement. Granted, the majority still considers the business situation to be good, but there was a sharp drop in the number of positive voices in July. Business expectations for the next six months deteriorated for the third time in a row. This is mostly likely due to growing concerns that the eurozone’s sovereign debt and banking crisis could get worse. After briefly entering the boom quadrant during the first quarter, the ifo Business Climate Index is now clearly in the downswing quadrant.