(Bloomberg) -- German factory orders dropped less than expected in October, raising the prospect that the country’s multi-year manufacturing recession is bottoming out.
Demand fell 1.5% from the previous month, less than the 2% decline economists polled by Bloomberg had estimated. Without large-scale orders, it increased 0.1%. The statistics office also revised higher the September reading to show a much stronger gain of 7.2%.
The fate of German industry has become a major source of concern after a sustained downturn, with business surveys by S&P Global signaling contraction in the sector since 2022. While that’s been partly blamed on weak foreign demand and high borrowing costs, structural problems at home have come increasingly under the spotlight.
The issues — including a shortage of skilled workers and lofty energy costs — are also among prominent topics in the campaign for federal elections scheduled for February. The problems are most obvious in the flagship car sector, where firms like Volkswagen AG are trying to cut costs as they struggle to shift to electric vehicles.
Germany’s DIHK industry lobby was downbeat about the report.
“Domestic demand has fallen to its lowest level since the Corona pandemic,” said DIHK’s Jupp Zenzen. “The current phase of uncertainty is also slowing down investments in this country. The only positive signals we’re seeing are from abroad.”
Bundesbank President Joachim Nagel has also warned about Germany’s prospects.
“The competitive position of German industry has worsened, and growing foreign markets have not provided growth impulses as they did in the past,” he said in a speech on Wednesday. “Industry is under significant pressure to adapt to changing structural conditions, both domestically and globally.”
Economists reckon German output will shrink for a second straight year in 2024, also citing lackluster consumption — despite rising incomes. The European Central Bank is providing some assistance: It’s cut interest rates three times since June and is widely expected to do so again when it meets next week in Frankfurt.
September data on German industrial production are due on Friday and are expected to show a 1% increase. French and Spanish numbers for that month showed a mixed picture, with the former unexpectedly contracting, while that later saw an uptick.
--With assistance from Joel Rinneby, Kristian Siedenburg, Barbara Sladkowska and Iain Rogers.
(Updates with comment from DIHK starting in fifth paragraph)
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