An Industry in Flux
Although some analysts expected growth in the German manufacturing sector, recent data show manufacturing orders dropped in the month of September.
Economists polled by The Wall Street Journal forecasted a one-percent increase from the previous month, but there was actually a 0.6% drop. By contrast, July and August showed 0.2% and 0.9% gains, respectively.
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An outsize portion of the declines came from domestic orders, which shrank 1.1% as opposed to the 0.3% fall in foreign orders. (Source: “German Manufacturing Orders Decline in September But Industry Seen Recovering,” The Wall Street Journal, November 7, 2016.)
The lackluster data is particularly worrisome to analysts and economists who view it as a consequence of Brexit. After Britain voted to leave the European Union in June, there was a flurry of predictions warning that growth would slow across the continent.
The political turmoil was not simply contained to Britain, but overflowed to the rest of the continent. Right-wing populism is on the rise in France and Germany, making it harder to forge the compromise needed for effective economic policymaking.
This has many economists worried that the continent’s never-ending parade of political crises will damage its economic health. Since Germany is both an exporter of manufactured goods and the main driver of European prosperity, a slowdown there could be disastrous for the union.
German officials and senior bankers are trying to put a positive spin on the numbers, saying on-the-ground realities tell a different tale of German manufacturing. The Economy ministry cited third-quarter orders as a whole, which add up to an altogether rosier 0.5%.
“The brightening of relevant sentiment indicators suggests a certain recovery of industrial production for the rest of the year,” said the ministry.
The optimists also brought up an important Ifo survey which shows how purchasing managers feel about the economy. They are slightly more upbeat about the near-term, but much of their positivity rests on developments in Asia and North America.
Some analysts believe the manufacturing orders will be buoyed by foreign demand once China’s economy recuperates from its various stock market crashes, and U.S. concludes its presidential election.
