German industrial orders fell far more than expected in May, reversing a recent uptick and weighed down by a sharp drop in demand from within the euro zone, according to data released Friday.
The German statistics office reported a 1.4% decline in orders compared to the previous month, based on seasonally and calendar-adjusted figures. Analysts surveyed by Reuters had forecast only a 0.1% drop.
The steep decline was mainly driven by a 17.7% month-on-month plunge in the computer, electronic, and optical products sector, which had seen several large orders in April. Orders also dropped significantly in the electrical equipment and basic metals sectors.
Excluding large-scale (volatile) orders, overall industrial orders declined by 3.1% in May.
While foreign demand rose by 2.9%, orders from within the euro zone dropped 6.5%, contrasting with a 9.0% increase in orders from outside the bloc.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, warned that if the euro continues to strengthen, it could erode Germany’s competitiveness and further dampen non-eurozone demand.
Domestic orders, meanwhile, saw a sharp 7.8% monthly decline, the statistics office added.
“This weakness may be temporary,” said de la Rubia, suggesting that Germany’s recently approved tax incentives and accelerated depreciation rules could help spur investment and restore momentum.
The government’s tax relief package aims to stimulate business investment and pull Germany out of a two-year economic downturn.
Looking at the broader trend, a three-month comparison showed new orders from March to May were 2.1% higher than in the previous three-month period.
Additionally, April’s order figures were revised upward, showing a 1.6% increase instead of the initially reported 0.6%, due to late data submissions from the automotive sector.
While May’s decline appears less severe when considering April’s upward revision, Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, noted that the production surge at the end of Q1 was fully reversed during the first two months of Q2.
Ralph Solveen, senior economist at Commerzbank, said a potential pickup in June—supported by improved business sentiment as seen in the Ifo index—could alter the outlook.
“Even so,” he cautioned, “any rebound is likely to be modest and won’t point to a strong industrial recovery.”
