German industry post steepest fall in five months in September

BERLIN (Reuters) - Weak demand both at home and abroad drove an unexpected fall in German industrial orders in September, data showed on Monday, dampening hopes that factories will make a significant contribution to growth in the third quarter.

A general view shows the Volkswagen (VW) factory in Wolfsburg, Germany in this December 8, 2015 file photo. REUTERS/Carl Recine/Files

Contracts for goods ‘Made in Germany’ were down by 0.6 percent on the month, the sharpest fall since April, after increases in the previous two months. The reading was well below a Reuters consensus forecast for a rise of 0.3 percent.

The economy ministry said the orders figures for the whole third quarter, not just September, were still positive.

“The brightening of sentiment indicators points to a certain recovery of the industrial sector over the rest of the year,” it added.

But analysts were less optimistic.

ING Bank said in a note to clients that the data reflected the reality of a sector that had been weak for almost three years, booking an average monthly growth of 0.1 percent over the first nine months of this year.

“The initial relief after the Brexit shock provided by two positive months with increasing new orders has now given room for realism,” ING economist Carsten Brzeski wrote in the note. “German industry is still running low on fuel.”

He added: “It is hard to see how German industry can shift to a higher gear. Against this background, the optimism reflected in surging confidence indicators is in our view striking.”

Domestic demand fell by 1.1 percent while foreign orders decreased by 0.3 percent. Demand from euro zone countries dropped by 4.5 percent.

The decrease was driven by weaker demand for capital goods, while orders for consumer and intermediate goods rose slightly.

The data for August was down to a rise of 0.9 percent from a previously reported increase of 1.0 percent.

Reporting by Joseph Nasr; Editing by Michelle Martin