By Ed Frankl
New orders at German factories showed better-than-expected growth in August, indicating a gradual rebound in the country’s manufacturing sector. Although not fully recovering from a steep decline in July, this uptick suggests a fragile yet promising environment.
Strong Performance in August
According to data released by the German statistics office Destatis, manufacturing orders increased by 3.9% in August compared to the previous month. This notable recovery follows a significant dive of 11.3% in July. Economists, polled by The Wall Street Journal, had anticipated a more modest 1.5% increase.
The surge was mainly driven by the manufacturing of computer electronic and optical products, which saw a remarkable jump of 37.9% in August. Orders in the electrical equipment and pharmaceutical sectors also experienced growth, rising by 8.7% and 4.0% respectively. However, orders in the crucial car industry slightly declined by 0.7%.
An Encouraging Trend
Even when excluding large-scale orders, which provides a more accurate reflection of underlying trends, new orders still showed a significant increase of 3.9% in August 2023 compared to the previous month. Additionally, on a less volatile three-month basis, new orders between June and August were 4.9% higher than in the previous three months.
These indicators suggest that Germany’s manufacturing industry may have reached its lowest point and is now on an upward trajectory. Purchasing managers’ surveys conducted among manufacturers also revealed improving sentiment for the second consecutive month in September. Contributing factors include falling input costs and a robust labor market, although the industry still remains contractionary.
The positive developments in German manufacturing are worth monitoring as they could potentially contribute to the overall economic recovery of the country.