By Ed Frankl
German manufacturing orders dropped in April, with weak demand set to persist amid the high uncertainty prompted by the war in Iran.
Factory orders fell 3.8% on month, the first decline since January, offsetting part of the 4.5% increase in March, data agency Destatis said Monday. A consensus of economists polled by The Wall Street Journal expected a 2.2% decline.
Some of the rise in orders in March was likely due to stockpiling as firms sought to get ahead of expected soaring prices due to the conflict.
The drop in April was led by falling output in the automotive industry and in electrical equipment, Destatis said. On a less volatile three-month on three-month basis, new orders were 3.1% lower, the data showed.
The sharply higher energy costs prompted by the conflict in the Middle East threaten to halt a nascent recovery of German industry, which was expected to see the benefits this year of a more-than $1 trillion fiscal stimulus from the German government for infrastructure and defense investments.
Uncertainty about developments in the Middle East will likely continue to dampen demand for German industrial goods, Ralph Solveen, senior economist at Commerzbank, said in a note to clients.
"We therefore expect the German economy to contract slightly again in the second quarter, with the industrial sector likely contributing to this decline," he said.
Manufacturing activity fell to a four-month low in May, according to a survey of purchasing managers, as uncertainty weighed on demand. The rate of input cost inflation faced by manufacturers jumped to the highest for nearly four years, leading firms to raise their prices in turn, the survey showed.
The European Central Bank is also expected to raise borrowing costs this week at a time the eurozone economy is struggling for growth. Gross domestic product in the eurozone fell 0.2% in the first quarter, revised data published Friday showed.
Write to Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
06-08-26 0324ET
