German Orders Continue Their Steady Melt

German orders in April fell by 0.4% in April as foreign orders led the way lower on a 1.8% month-to-month decline. Domestic orders rebounded from a steep decline in March to rise by 1.6% month-to-month. Both foreign and domestic orders had fallen sharply in March. Foreign orders fell by 13.1% and domestic orders fell by 7.7% even though February had produced strong gains in both categories. Over three months both foreign and domestic orders now are showing steep declines.

German real orders The sequential growth in orders for Germany shows deterioration although not a progressive deterioration across the board. Orders fall by 10% over 12 months. The annual rate picks up to a -14.6% annual rate over six months and then further accelerates to -26.3% over three months. This deterioration is led by foreign orders with a 12-month percent change at -10.7%. The annual rate drop over six months is nearly twice that at a -20% pace and the 3-month decline nearly twice that at a -37.3% pace. Domestic orders follow suit with weakness but are not sequentially worsening. Domestic orders fall by 8.8% over 12 months, then reduce their pace of slippage with a -6.2% annual rate fall over six months, then reaccelerate to a -7% pace over three months, a pace of decline that is a slightly faster drop than over three months but still less than the 12-month pace. On balance, the picture of the German economy is quite clear: weakening over all horizons is in progress and the weakening is worsening overall led by a significant worsening of foreign orders.

Real sales Sector sales in manufacturing show progressive deterioration from a gain of 3.1% over 12 months to a decline at a 3.7% annual rate over six months and a decline at a faster, 7.7% annual rate over three months. Consumer goods contribute to this secular deterioration and deceleration with a 4.4% decline over 12 months, a -5.3% pace over six months and a -6.3% pace of decline over three months. Capital goods follow suit as well. However, they post a strong 13.9% gain over 12 months that quickly dissipates to a -0.8% annual pace of decline over six months and a -13.7% pace over three months. Intermediate goods break the pattern; they show a -4.5% pace of decline in sales over 12 months and a worsening -6.1% pace of decline over six months, but then intermediate goods sales increase by 0.8% at an annual rate over three months. Even though the picture is clear that sales are weakening and for the most part they are deteriorating, the deterioration for consumer goods is caused by nondurable goods whereas consumer durable goods sales are showing acceleration, but not enough to impact and reverse the secular decline in the headline pace of sales for consumer goods overall.

Industrial Europe The EU industrial confidence measures for Germany, France, Italy, and Spain show declines for all four countries in April as well as in March. All four confidence measures worsen in April compared to March. The average EU confidence indicators show worsening in confidence in the 6-month average compared to the 12-month average for all four countries; however, for 3-months compared to 6-months, there is less weakness registered for Spain, for Italy, and for France. Only Germany shows period-to-period deterioration; however, over three months Germany alone shows a net positive reading while the other three countries show negative readings (but negative readings that are smaller over three months than they were over six months on average).

Q2 now in progress April brings us the first reading for the second quarter. To start the second quarter, conditions show negative growth in Germany for total orders, for domestic and foreign orders, and for all the sector sales categories except for sales of consumer durables. The queue percentile standings on the EU industrial measures for Germany, France, Italy, and Spain show only France with a standing that's below its median - that is below a standing of 50%. However, Italy is marginally above 50% with a 53.6 percentile standing.

Summing up This report for Germany is clearly weak. It's weak overall, it's weak for foreign orders, and for domestic orders, it shows weakness in sales, that is pretty much across the board. In addition to weakness, it shows broad sequentially deteriorating conditions. The industrial confidence data from the EU shows that the four largest countries in the European Monetary Union share this industrial weakness with all four of them showing negative readings for both April and March on this metric. The German order and sales data are inflation-adjusted and their signal about Germany economy orders and sales is poor. In addition, weak European conditions based upon the EU survey are good reasons to have concern about the future.