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Fresh manufacturing and retail sales data out of Germany painted a mixed picture on Friday, with factory orders plunging as retailers enjoyed a boost.
According to the Destatis federal statistics office, factory orders tumbled 5.3% month-on-month in November.
That was a swing from a revised 0.6% rise in October, and was well below the 0.5% decline economists had pencilled in.
“Demand for German manufacturing goods softened significantly midway through the fourth quarter, partly due to a decline in large orders,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.
“Excluding so-called large-scale orders, new orders slipped by 2.9%.
“The headline was primarily pulled lower by a 8.1% slide in export orders, split between a 10.3% fall in demand from other eurozone economies, and a 6.8% decline in new orders from non-EZ economies.”
Vistesen noted that domestic orders retreated by 1.1%, while capital goods orders crashed by 8.5%, thanks to falling demand for bulk orders in rail stock, spacecraft and aircraft.
Excluding that component, capital goods orders were down 3.9%.
Elsewhere, new orders for intermediate goods fell by 0.9%, extending the downtrend in recent months, while new orders for consumer goods dipped by 0.7%.
“These numbers aren’t pretty, but note that the real turnover in manufacturing rose strongly by 2.1% month-to-month, pointing to a consensus-beating industrial production headline on Monday,” Vistesen explained.
“The decline in October was revised down slightly, by 0.2 percentage points, to 0.4%.”
Overall, Claus Vistesen said the manufacturing data sent two “somewhat contradicting” messages.
“First, underlying demand in manufacturing is now in a clear downtrend.
“Secondly, however, it now seems that industrial production performed a good deal better than expected in the fourth quarter, just as was the case in the third, likely due to pent-up demand in key sectors as supply-side tensions more generally eased.
“Yes, we’re looking at the auto sector.”
On the retail front, meanwhile, sales advanced 1.1% month-on-month in November, clawing back some of the 2.8% fall recorded in October.
That was also just above consensus expectations for a 1.0% improvement.
The year-on-year change, however, fell by 0.9 percentage points to reach a 5.9% decline.
“The rebound in sales midway through the fourth quarter was tepid overall, considering the big decline in October and Black Friday,” Pantheon’s Claus Vistesen added.
“Note, however, that Black Friday was relatively late in the month this year, on 25 November, which suggests that any boost could be picked up in the December report or via revisions to today’s November headline.
“High inflation continues to drive a significant wedge between soaring nominal sales and depressed inflation-adjusted demand, though on the month in November, the deflator eased somewhat.”
Nominal sales increased 1.3%, with Vistesen noting that some details were usually seen in press releases from Destatis, although not on this occasion.
“All we can say then is that the stage is set for a fourth quarter fall in retail sales and, as a result, consumers’ spending on goods.
“The carry-over – the change in the fourth quarter if sales were unchanged in December – is -1.7%; we think this is a reasonable forecast at this point.”
Vistesen said overall goods spending likely did somewhat better in the final quarter of 2022, thanks to rising car sales, but added that that services spending likely fell, due to a setback in hospitality.
“Overall, we forecast that household consumption declined by 0.5% quarter-on-quarter in the fourth quarter.”
Reporting by Josh White for Sharecast.com.
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