The reduction in demand for orders within the German industrial sector has occurred.
Germany's industrial order backlog saw a decrease in August, primarily due to the rough terrain in the automotive sector. The Federal Statistical Office reported a 1.0% dip in outstanding orders compared to July, which saw an increase thanks to large orders, the first since December 2023. Inflation-adjusted, the order volume shrank by 4.7% compared to the same period in the previous year.
Alexander Krüger, chief economist at Hauck Aufhäuser Lampe Privatbank AG, added his perspective, stating, "The July bump was merely a temporary blip. The order situation is tough, and the outlook is bleak. It's no surprise the numbers are heading downhill." A turnaround in this negative trajectory seems unlikely. The indicators continue to suggest a need for capacity reduction, which could impact employment more significantly.**
The domestic order stock dropped by 0.6% in August from July. Overseas orders, however, experienced a more pronounced decrease of 1.1%. The statisticians noted that "August 2024's order stock decrease was mainly due to automotive industry developments," with vehicle production seeing a 6.4% decrease. Fortunately, the manufacturing of electrical equipment offered some positive impulses, showing an increase of 1.5%.**
The industry's order stock coverage remained at 7.3 months in August. This figure implies that, under constant production rates, companies would theoretically have enough time to work through their existing orders without needing to secure new ones.
The decrease in overseas orders can be attributed to challenges in the manufacturing sector, further impacting Germany's industrial growth. The automotive sector, in particular, has been facing difficulties, as indicated by the 6.4% decrease in vehicle production.
The manufacturing of electrical equipment, however, has shown resilience, with an increase of 1.5%, providing some positive impulses in the otherwise challenging manufacturing environment.
