German industrial orders bounce back, but supply bottlenecks weigh

BERLIN (Reuters) – German industrial orders rose more than expected in June, data showed on Thursday, driven by bookings for large industrial items, mainly from domestic clients.

FILE PHOTO: A steel worker of Germany’s industrial conglomerate ThyssenKrupp AG, which holds its annual shareholders meeting on Friday, February 1, 2019, stands amid sparks of raw iron from a blast furnace at Germany’s largest steel factory in Duisburg, Germany, January 28, 2019. REUTERS/Wolfgang Rattay

The figures published by the Federal Statistics Office showed orders for goods ‘Made in Germany’ jumped by 4.1% on the month in seasonally adjusted terms.

This easily beat a Reuters forecast of a 1.9% increase and followed a drop of 3.2% in May, revised from a drop of 3.7%.

Excluding major orders, new orders in manufacturing rose 1.7% on the month.

Domestic orders soared nearly 10%, with producers of data processing equipment, lens systems, planes and ships benefiting from unusually strong demand, the economy ministry said.

“Incoming orders also rose in the important car and mechanical engineering sectors,” the ministry added.

The German economy returned to growth in the second quarter but bounced back less strongly than expected as manufacturers struggle to get intermediate goods and building materials to ramp up production.

“Although the order backlog is high, it cannot be processed quickly due to ongoing delivery bottlenecks for intermediate products and materials,” Bankhaus Lampe analyst Bastian Hepperle said.

In a further sign that high orders are currently not translating into higher output, real turnover in manufacturing fell by 1.4% on the month in June in seasonally and calendar-adjusted terms, the office said. On the year, real turnover rose by 8.6%.

The supply bottlenecks in manufacturing will continue to hold back production, so industry is likely to slow down the economic recovery in the third quarter as well, Hepperle added.

Undersupply of semiconductors is leading to production downtimes in the car industry and many other industrial sectors.

“But the shortage of skilled workers is also becoming more and more noticeable,” VP Bank economist Thomas Gitzel said.

The current recovery is supported by strong retail sales, which jumped in May and June following the lifting of COVID-19 restrictions.

A survey indicated on Wednesday that domestic demand remains strong, with activity in the service sector growing at the fastest pace on record in July.

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