Utterly Terrible: Order Book Contraction Nightmare Drags Into 18th Month In Germany

While market participants were understandably fixated on worsening tensions between the US and Iran on Wednesday, Germany was busy reporting yet another egregious slump in factory orders.

To be sure, nobody expected November’s numbers to be “good”, but the 6.5% YoY drop was well worse than consensus and pretty much rules out any “light at the end of the tunnel” narrative.

Please take note: This is 18 consecutive months of order book contraction.

That is egregious – utterly egregious.

And the MoM number missed too, printing -1.3% versus an expected 0.2% gain. Capital goods orders fell 2.1% MoM, consumer goods orders were unchanged, and basic goods orders rose 0.2%.

Domestic orders increased 1.6% and foreign orders fell 3.1% in November, the federal statistics office said. New orders from the euro-area dropped 3.3%, while new orders from other countries fell 2.8% compared to October.

This clearly suggests that small upticks in the manufacturing PMI aside, Germany is still mired in the worst factory slump in recent memory.

As a reminder, we do not traffic in fearmongering, nor do we revel in bad news. This is a situation where it’s difficult to describe the malaise in terms that are anything other than dour.

Meanwhile, VDA said this week that German car production fell to the lowest in nearly a quarter century in 2019. Volkswagen, BMW, Daimler and others produced just 4.66 million vehicles in German factories last year, the least since 1996.

Needless to say, Donald Trump’s trade war is in no small part to blame for all of the above, although Brexit uncertainty hasn’t helped.

After missing a deadline to decide on the imposition of auto tariffs on European cars under Section 232, the Trump administration is rumored to be considering a separate 301 investigation in order to justify more levies on the Europeans. That would be on top of the tariffs on France related to the tech tax.

The US president has, at various intervals, threatened to effectively ban Mercedes from the US, despite some of them being made in America.


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