Sound bites: April's 2.3% dip in German new orders does not signal the start of a new downturn

April’s 2.3% dip in German new industrial orders is nothing to worry about. It comes on the heels of two very strong months of new orders expansion in February and March. It does not detract from the German recovery which is moving well into its stride now. German exports have been the bright spot in the German recovery and foreign orders seem to be trending back towards their long term growth potential. The key for sustainability going forwards will be the health of Germany’s economic partners in the Eurozone. Unless these get back into better shape, they could start to throw an anchor out behind German export growth since the Eurozone accounts for such a large slice of German foreign trade.

Outside of Europe, the picture remains much brighter. Beyond Europe, capital and investment goods orders are still faring well as the global economy continues to tool up for recovery ahead. German capital goods orders outside of Europe continue to move above trend. This should be an important bellwether for world growth potential.

On a two month trend, new German export orders are up 0.6% compared with a year ago, a positive result considering the dismal economic picture in the Eurozone. German domestic orders are down 2.2% compared with a year ago. Domestic demand should eventually be re-vitalised by the wave of positive pay awards in Germany boosting disposable incomes and consumer spending power. The outlook is a lot brighter than the latest figures suggest.

                               APRIL 13           MARCH 13
                           Index      Pct     Index      Pct
                                     change            change
 Total domestic orders     99.8     -3.2      103.1   +2.0
 Total foreign orders      106.2    -1.5      107.8   +2.7
     of which euro zone    94.6     -3.6      98.1    +4.0
        non-euro zone      114.3    -0.2      114.5   +1.9
 Intermediate goods        99.4     -1.9      101.3   +3.4
 Of which: domestic        97.7     -4.0      101.8   +3.8
           foreign         101.5    +0.8      100.7   +2.9
    of which euro zone     97.9     -3.5      101.5   +5.8
       non-euro zone       104.9    +5.0      99.9    unch
 Capital goods             105.7    -3.6      109.7   +2.2
 Of which: domestic        102.2    -3.2      105.6   +0.7
           foreign         107.8    -4.0      112.3   +3.2
    of which euro zone     89.5     -7.0      96.2    +3.9
       non-euro zone       117.8    -2.7      121.1   +2.9
 Consumer goods, durables  106.6    +7.5      99.2    -0.8
 Of which: domestic        98.6     +2.4      96.3    +0.5
           foreign         113.5    +11.7     101.6   -1.8
    of which euro zone     109.4    +14.8     95.3    -1.5
       non-euro zone       118.0    +8.7      108.6   -2.2

Two-month comparison April/March 13 with previous two months:

 Industrial orders                  +2.3
 Domestic orders                    +1.4
 Foreign orders                     +3.0
       of which euro zone           +2.8
            non-euro zone           +3.1
 Intermediate goods                 +2.9
 Capital goods                      +1.9
 Consumer goods, durables orders    +1.9

Unadjusted two month comparison April/March with same period a year ago:

 Industrial orders                  -0.6
 Domestic orders                    -2.2
 Foreign orders                     +0.6
 Intermediate goods                 -0.4
 Capital goods                      -1.0
 Consumer goods, durables orders    +0.7