German industry received far more orders in June than economists had expected. New business in manufacturing rose 3.1 percent against May, adjusted for seasonal and calendar effects. The Federal Statistical Office published the figure on 6 August.
For a sector that has struggled with weak demand for years, this is a rare bright spot. It was the second increase in a row. Revised figures put May's gain at 0.3 percent. Economists surveyed ahead of the release had forecast only 0.3 to 0.5 percent for June, according to Handelsblatt and ZEIT Online.
Two areas carried the increase. Mechanical engineering reported 12.7 percent more orders. Makers of data processing equipment and electronic and optical products booked 22.7 percent more. The car industry added 3.8 percent. In the steadier three-month comparison, orders from April to June stood 1.3 percent above the previous quarter.
What follows from this matters most. Orders turn into production a few months later, and into work. "The good order intake lays the groundwork for a medium-term expansion of production," Thomas Gitzel, chief economist at VP Bank, told Handelsblatt. German business has completed its turnaround, he said. Jens-Oliver Niklasch of Landesbank Baden-Württemberg puts it more cautiously. The economy is running somewhat better than assumed until recently.
Two caveats
Part of the gain rests on a handful of large individual orders. Without them, June's bookings would have shrunk. Such jumps say little about the breadth of demand.
The second caveat lies in the water. The Rhine has hit record low levels, ZEIT Online reports. Barges can carry less, and inputs reach the plants more slowly. The chemical association VCI warns of broken supply chains. "The fly in the ointment is the low Rhine level, which could stand in the way of expanding production," Gitzel said.
Marc Schattenberg of Deutsche Bank Research even considers a halt possible. If levels keep falling, commercial shipping could become so expensive that it no longer pays. Little can be changed about that in the short term. Industry associations were due to meet transport minister Steffen Bilger in Bonn on 6 August to discuss the low water. Whether industry can work through its full order books now depends on the river as well.