D.he German industrial companies recorded the largest increase in orders in ten months in June. As the Federal Statistical Office announced on Thursday, orders were 4.1 percent higher than in the previous month. However, supply bottlenecks are causing problems for the industry. That’s why sales are falling.
Economists were surprised by the strong increase in orders, as orders had fallen by 3.2 in May. Compared to February 2020, the month before the restrictions due to the corona pandemic began, orders were 11.2 percent higher. “Overall, the incoming orders continue their upward trend that has existed since the beginning of the year after a brief interruption in May,” said the Ministry of Economic Affairs.
The growth was mainly driven by strong domestic demand. It increased by 9.6 percent compared to the previous month. According to the Ministry of Economic Affairs, the orders came primarily from the IT, optics and other vehicle construction sectors. Incoming orders also rose in the automotive and mechanical engineering industries.
The fact that the order books of industrial companies filled again in June was largely due to large orders. Without taking this into account, orders rose by a total of 1.7 percent.
Weak demand from abroad
Demand from abroad was comparatively weak. It was only able to increase by 0.4 percent. While 1.3 percent more orders came from the euro zone, demand from the rest of the world fell by 0.2 percent. According to Thomas Gitzel, VP Bank’s chief economist, this trend could intensify. The orders will therefore bubble less strongly in the coming months. ”Commerzbank economist Ralph Solveen also expects a“ sideways movement ”in incoming orders in the coming months.
But the orders could not be processed quickly anyway because of the ongoing supply bottlenecks for preliminary products and materials, says Bastian Hepperle from Bankhaus Lampe. This is also indicated by falling sales. In June, industrial companies sold 1.4 percent less than in the previous month.
According to a recent survey by the Munich Ifo Institute, more and more companies are suffering from material shortages. From April to July the proportion rose from 45 to almost 64 percent. Semiconductors are still in short supply. This is felt above all by the manufacturers of electrical equipment (84.4 percent) as well as car manufacturers and their suppliers (83.4 percent). Among the manufacturers of electronic devices, 72.2 percent complain about a lack of material, among the mechanical engineering companies the figure is 70.3 percent.
A look at the range of the order backlog shows how big the traffic jam is. It was last 7 months in May. That is how long the companies would theoretically have to produce without any new incoming orders in order to process the existing orders, assuming sales remained the same.
The industry is likely to have stagnated or even contracted in the second quarter. As long as the gap between incoming orders and production continues, nothing will change in the summer, expects Hepperle from Bankhaus Lampe. “The industry is likely to slow down the economic recovery in the third quarter as well.”