(Bloomberg) -- Factory orders in Germany plummeted in August, marking yet another setback for industry in a year when Europe’s biggest economy has failed to deliver a much-awaited recovery.
Demand declined 5.8% from July after two consecutive months of increases, data released on Monday showed. That’s the biggest drop since January and far worse than anticipated by any of the 17 economists in Bloomberg survey.
The bleak report kicks off a pivotal week for Germany, which will also feature industrial production data on Tuesday followed the next day by the latest economic forecasts from Chancellor Olaf Scholz’s government.
With the economy still struggling to shake off fallout from the gas-supply shock in the wake of Russia’s invasion of Ukraine, and Volkswagen AG warning of factory closures, officials are about to abandon hope of achieving any full-year growth in 2024, according to people familiar with the matter.
Sueddeutsche Zeitung reported over the weekend that the forecast will be for a 0.2% contraction this year. The SZ report cited Vice Chancellor Robert Habeck as saying that the “economic situation is difficult” and that the “German economy hasn’t grown properly since 2018.”
Declining orders point to further weakness at a time when the economy might even have been in recession. The Bundesbank observed last month that gross domestic product may have stagnated or fallen in the third quarter, following a slight drop in the prior three months.
The pace of decline was accentuated by large increases the previous month for large-scale transport-equipment orders, according to Destatis, the federal statistics agency. July’s increase was revised higher.
Sentiment indicators point to further woes ahead. The Ifo institute’s expectations gauge, drawn from a survey of businesses, dipped in September to 86.3, the lowest since February. Separately, indexes compiled with responses from purchasing managers signaled continuing overall private-sector contraction during the month.
With the wider euro-zone economy suffering weakness and inflation pressures showing increasing signs of having dissipated, European Central Bank policymakers are gearing up to deliver another quarter-point cut in interest rates next week.
--With assistance from Joel Rinneby, Kristian Siedenburg and Michael Nienaber.
(Updates with Habeck in fifth paragraph)
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