German orders increased but are still on a downtrend – Commerzbank

Dr. Ralph Solveen, Senior Economist at Commerzbank, offer a brief analysis of the upbeat German data releases earlier this Tuesday, which showed that Factory Orders increased by 0.8% in October.

Key Quotes:

“The trend in orders continues to point downwards despite the increase in October. This is also supported by the results of the Ifo survey, in which companies revised their assessment of the demand trend downwards until recently. Obviously, the noticeable interest rate increases by many central banks are increasingly dampening demand for German industrial products.”

“As many companies continue to have a very high order backlog, weaker demand is unlikely to impact production as strongly this time as in previous cycles. However, the trend is still likely to be downward in the coming months, partly because production in the energy-intensive sectors is likely to be cut further due to the sharp rise in energy prices. As a result, manufacturing is likely to contribute to the German economy contracting in the first half of the coming year, even if the risk of a slump triggered by gas rationing has been noticeably reduced.”