Amid gloomy economic growth data, German manufacturers saw their first monthly increase in orders in six months.

Germany's Federal Statistical Office (Destatis) reported on August 6 that industrial orders in Europe's No. 1 economy rose 3.9% month-on-month. Analysts had expected a much smaller increase of 0.5%.

For industry – the backbone of the German economy – the increase in June was driven by domestic orders, which rose 9.1%, Destatis said. Demand from abroad rose just 0.4%.

Regardless, this is good news not only for manufacturers but also for an economy that is on the brink of a technical recession, shrinking by 0.1% in the second quarter of 2024, which has also affected economic sentiment. Since a technical recession is defined as two consecutive quarters of GDP decline, this year's third-quarter figures will be crucial.

The auto industry remains the main driver

Orders in the automotive manufacturing sector rose 9.2% in June, keeping the sector the main driver of growth in the German economy, according to Destatis.

Metal product manufacturers and those involved in the construction of aircraft, ships and trains also saw orders rise by 12%. However, in the computer, electronic and optical equipment sector, orders fell by 7.9%.

According to the latest Destatis figures, the figure would have been lower, at 3.3%, without some large-scale orders, which can be volatile.

A year-on-year comparison shows less reason for optimism in the industry, with orders down 11.8% year-on-year (June 2023).

The German Economy Ministry said that although recent manufacturing figures showed an improvement, industry is expected to remain sluggish due to pessimistic business expectations in the manufacturing sector.

"Given the persistently low level of foreign orders, we do not expect a broad-based economic recovery in the near future," the ministry said.

"There is no reason to think that everything is okay"

The German government's assessment is also in line with the thinking of experts. Economist Jupp Zenzen of the German Chamber of Commerce and Industry (DIHK) also said that despite the increase in orders in June, "unfortunately there is no reason to assume that everything is in order." The expert called the first half of 2024 "disappointing" overall.

“German industry is at risk of losing competitiveness due to a number of structural problems, such as high costs, bureaucratic procedures and a lack of skilled workers,” Zenzen said, adding that energy prices also remained an issue.

Destatis said orders in the second quarter of this year, from April to June, fell 1.4% compared to the previous quarter (Q1 – January to March).

Given the significant declines in previous months, June's increase may just be a bottoming out rather than a sustainable trend, according to HSBC economist Anja Sabine Heimann.

“The pressure on industrial manufacturers remains high, and capacity is unlikely to expand in the near term. We therefore expect to have to wait for a solid recovery in German manufacturing for some time,” Heimann noted.

Minh Duc (According to DW, WSJ, Xinhua)