German factory orders rise, but revisions paint gloomy outlook

(Sharecast News) - Factory orders in Germany unexpectedly rose in September, figures from the Deutsche Bundesbank revealed on Monday, though downward revisions to previous data point to a bleak outlook for manufacturing. Orders - defined as shipments, inventories, and new and unfilled orders - rose by 0.2% over the month, better than the 1% decline expected.

However, that follows a 1.9% increase in August, which was revised down substantially from the 3.9% rise initially estimated, due to "incorrectly reported data in the manufacturing of data processing equipment, electronic and optical products".

New orders were up only marginally, as large single orders above €50m drove the headline increase. Without these, new orders would have been down 2.2% on the month.

Commenting on the data, Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: "In total, new orders plunged by 4% quarter-on-quarter in Q3, with the Q4 carry-over-the change if new orders are unchanged at their September value through Q4-at +0.8%. That points to somewhat better conditions in Q4, but not much to write home about in comparison with the slide in Q3."

Monday's separate data release for turnover data suggests that production (excluding construction) fell in September, which could result in worse-than-expected figures on industrial production out on Tuesday, Vistesen said. "As such a downward revision to GDP growth is now in the cards too."

He added: "Overall, a large stock of unfilled orders continue to support production growth, relative to the pace in new orders. Put differently, output would be falling more quickly if it wasn't for unfilled orders. That said, the near-term outlook for manufacturing remains bleak.

"The surveys remained depressed at the start of Q4, and while some of the details-the IFO new orders-to-inventory ratio for example-now appear to be turning, in line with a pick-up in the second derivative of some key global manufacturing data, we see little in the way of a rebound in production in Q4."