German industrial orders saw an uptick for the initial time, marking an increase in demand.
For the first time this year, German industry's order backlog saw an upward trend in July. The number of outstanding orders saw a 1.0% hike compared to June, primarily due to a surge in major orders, as stated by the Federal Statistical Office on July 27th. This was the first rise in order backlog since December 2023, according to the report.
Experts, however, are yet to foresee a significant upturn. "The decrease in orders is being somewhat restrained by these major orders," opined Alexander Krüger, the chief economist of Hauck Aufhäuser Lampe Privatbank AG. "At best, there's a faint possibility of a turnaround beginning." The sector has witnessed an unexpectedly strong performance in the second half of the year thanks to these substantial orders. Orders surged by 2.9% from the previous month in July, marking the second successive month of expansion. However, this impressive growth is solely attributable to these substantial orders. If not for them, orders would have dipped by 0.4%. "This July order backlog increase should not be overplayed," warned Cyrus de la Rubia, the chief economist of Hamburg Commercial Bank.
The domestic order backlog rose by 2.1% in July, while the foreign one climbed by 0.4%. The sector's improvement was mainly driven by the manufacture of various vehicles, which encompasses aircraft, ships, trains, and military vehicles, with a 2.6% rise due to several significant orders. The rise in orders for electrical equipment manufacturers (+3.4%) also contributed positively. However, the machinery sector saw a 1.0% decline.
The industry's order backlog coverage extended slightly to 7.3 months in July. This metric indicates the number of months that companies theoretically would need to maintain their current production rate without securing new orders to fulfill existing ones.
The uptick in July's order backlog can be largely attributed to an increase in major manufacturing orders. This surge in manufacturing orders helped to mitigate the overall decrease in orders within the sector.
