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Germany: Incoming orders increase for the third month in a row – VP Bank column

Incoming orders in July increased by 2.8% compared to the previous month. This is the third increase in a row – which is unusually positive for the normally volatile development of incoming orders. The plus, however, is less significant than was expected. In particular, fewer orders are coming from within Germany. However, orders from abroad are strong.

The German economy takes a deep breath. The order situation is improving – albeit less clearly than expected. However, if you take out the fluctuating large orders, the order increase was 6.2% compared to the previous month. The figures are therefore good despite the slightly weaker than expected development.

If the order books fill up, this is also good news for all those employees who are affected by short-time work. The German manufacturing industry is the third largest employer in Germany according to economic sectors. This shows the central importance of incoming orders data for the entire German economy. More jobs also means more employment. In turn, more employment means more private consumption. It’s pure refreshment when the order books fill up.

But with all the joy about the new plus, the overall situation must not be forgotten. The incoming orders are one thing, the other is the absolute order backlog. The latter still doesn’t look very edifying. The order situation may be improving at the moment, but the fact is that the order backlog has been on the decline since 2019. Even before the outbreak of the corona pandemic, the wailing in the manufacturing industry was unmistakable.

The strong increase in orders that has been observed since May is a reflection of the massive slump caused by the lockdown in March and April. Compared to July 2019, incoming orders are still 7.3% in the red. This shows that the situation is by no means rosy again. And there is another sore point. Compared to the previous month, domestic orders fell by 10.2%. The German industry itself is stepping on the brakes with new orders. It was thanks to the strong orders from abroad that in the end there was an increase of 2.8%. Incoming orders from the Eurozone rose by 7.3%. Incoming orders from the rest of the world even increased by 19.2% compared to June 2020.

Overall, the following applies: We can look forward to the third order increase in a row. It’s going on again. However, despite all the joy, it should not be forgotten that the situation in the manufacturing sector was difficult even before the corona pandemic. The structural change in the automotive industry is having a negative impact. The machine and system builders can tell a song about it. The worst pain may have been alleviated, but chronic economic tension will remain in the manufacturing sector for the time being.

Disclaimer: This text is a column of the VP Bank. 4investors is not responsible for the content of the column and therefore does not necessarily have to agree with the opinion of the 4investors editorial team. Any liability and claims are therefore expressly excluded by 4investors!

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