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ECONOMY

German factory orders slump in November

German industrial orders, a key measure of demand for German-made goods both at home and abroad, fell unexpectedly in November, data showed on Thursday, but analysts insisted the uptrend remains intact.

Published: 8 January 2015 09:53 CET
Updated: 8 January 2015 11:18 CET
German factory orders slump in November
Photo: DPA

Industrial orders dropped by 2.4 percent in November compared with the previous month, the economy ministry said in a statement.

In October, German factory orders had risen by 2.9 percent.

Domestic orders slumped by 4.7 percent and export orders slipped by 0.7 percent compared with the previous month.

Orders from the eurozone rose by 2.7 percent while those from outside the eurozone were down by 2.6 percent, the ministry calculated.

By sector, orders for semi-finished goods fell by 2.3 percent and those for capital goods slumped by 3.1 percent, while demand for consumer goods rose by 2.6 percent.

Analysts said the surprisingly steep drop in the headline number was no cause for outright concern.

"It was the first decline after two consecutive and strong increases.

Hence, there is no need for being disappointed," said UniCredit economist Andreas Rees.

"We have to be a bit more patient. In terms of business sentiment, there is more and more evidence that German companies already turned the corner.

However, hard data typically lag behind such leading indicators. While economic momentum should have remained subdued at year-end 2014, an acceleration in the first quarter of 2015 is in the pipeline," Rees said.

Commerzbank economist Marco Wagner agreed, noting that the strong increase in orders the previous month had been distorted upward by big-ticket orders for vehicles and aircraft.

"In all, orders in October and November were around 0.5 percent higher than in the third quarter, a positive signal suggesting that the German industry has overcome its soft patch," Wagner said.

BayernLB economist Stefan Kipar said the weaker euro and falling oil prices "should provide a boost to the global economy in 2015. And the internationally competitive German industry should benefit from that."

Natixis economist Johannes Gareis was confident that the German economy would not "fall back into recession in the fourth quarter."

Berenberg Bank economist Christian Schulz calculated that factory orders "remained on a moderate uptrend in the fourth quarter, despite the sharp drop in November."

The data "add to the upside risk to our fourth-quarter forecast for German growth," he said.

SEE ALSO: German jobless rate lowest since unification

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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