FX.co ★ German Exports Rebound; Industrial Orders Data Disappoint

In March, Germany's exports significantly bounced back, exceeding expectations, despite an unexpected drop in industrial orders due to weak domestic demand. This situation dampens expectations for a robust economic recovery.

Exports rose by 0.9% on a month-by-month basis, reversing the 1.6% drop experienced in February, which was initially thought to be a 0.3% gain, according to Tuesday's report by Destatis. This exceeded forecasted growth of 0.4%.

While imports also increased, the rate slowed to just 0.3% from 3.0% in the previous month. Against expectations of a 1.0% decrease, this outcome was more positive.

These shifts resulted in a trade surplus of €22.3 billion in March, up from €21.4 billion in the previous month, although this was slightly less than the anticipated €22.4 billion.

Over the last year, exports have dropped by 8.3% following a previous decrease of 1.1%. Concurrently, imports also saw a more significant drop of 9.6%, up from 6.7%.

Another released report also indicated a 0.4% monthly decrease in factory orders, which challenges expectations of a 0.4% increase. However, the decrease was less severe than the revised 0.8% drop observed in February.

Both capital goods and intermediate goods reported a 0.4% drop in new orders. However, the consumer goods sector saw a 0.7% rise.

Foreign orders saw a 2.0% increase, driven by a 10.6% increase from the euro area. Conversely, non-euro area orders dropped 2.9%. Simultaneously, domestic orders saw a significant decrease of 3.6% from the previous month.

Year-on-year, the shrinkage in factory orders decreased to 1.9% from 8.8% seen in the last month.

ING economist Carsten Brzeski stated that while the data confirmed the shift back towards export-oriented growth in Germany, the weakness in industrial orders suggests this resurgence will be temporary.

Official data affirms that the German economy narrowly sidestepped a recession in the first quarter due to increases in exports and construction investment. The national Gross Domestic Product saw 0.2% growth, following a 0.5% decrease in the previous quarter.

Meanwhile, data from the Purchasing Managers' surveys revealed a continued downturn in the German construction sector into April. The S&P Global/HCOB construction Purchasing Managers' Index fell to 37.5 from 38.3 in March, indicating a contraction in the sector, with a score below 50.0.