German industrial orders slip on weak foreign demand

German industrial orders decline unexpectedly in November on weak foreign demand and a lack of major contracts, data showed on Wednesday, suggesting that a manufacturing slump will continue to curtail growth in Europe’s largest economy.

Germany’s export-dependent manufacturers are struggling with sluggish demand from abroad as well as business uncertainty linked to trade disputes and Britain’s decision to leave the European Union.

“The misery in manufacturing continues,” VP Bank economist Thomas Gitzel said, noting that the military escalation between the United States and Iran was now posing an additional risk for businesses.

Finance Minister Olaf Scholz told reporters in Berlin that the situation in the Middle East had become “very dangerous”. But he added that he did not expect any major consequences for growth, because Germany’s domestic economy remained stable and there were signs the Sino-U.S. trade dispute was easing.

Contracts for German goods decreased by 1.3% from the previous month, posting the steepest drop since July, data from the Economy Ministry showed. That confounded the Reuters consensus forecast for a 0.3% rise.

Demand from other countries fell 3.1%, the biggest drop since February. Orders from domestic clients rose 1.6%. The reading for October was revised up to a rise of 0.2% from a previously reported decline of 0.4%.

DIHK economist Katharina Huhn said that orders from the eurozone had weakened significantly, suggesting a broader malaise in the region.

“In addition to the decline in foreign orders, there has also been a gradual decline in domestic demand,” Huhn warned.

Without bulk orders, industrial orders rose 1.0% in November, the economy ministry said, adding that incoming orders had stabilized at a low level in recent months.

“At the same time, business expectations in manufacturing have brightened somewhat. So the outlook for industrial activity has improved a bit,” the ministry said.

German business morale rose to a six-month high in December, a survey by the Ifo institute showed last month, suggesting that the German economy picked up in the fourth quarter despite manufacturing’s problems.

The German economy probably grew 0.5% in 2019, down from 1.5% in 2018. The statistics office releases preliminary gross domestic product growth data on Jan. 15.

For 2020, the government forecasts 1.0% growth, helped by a higher number of working days. On a calendar-adjusted basis, Berlin predicts 0.6% growth this year. Meanwhile, French consumer confidence pulled back more sharply than expected in December in the face of nationwide strikes against government plans to overhaul the pension system, official data showed on Wednesday.

The INSEE statistics agency said that its monthly consumer confidence index fell for the first time since December 2018 when France was mired in anti-government “yellow vest” protests against the high cost of living and general elitism.

The index fell to 102 - the lowest since July - from 105 in November, which was revised down from 106 previously. The December outcome fell short of economists’ average forecast for 104 in a Reuters poll.

“Protests against the government pensions reform are likely to have played a role, and may weigh on economic activity going forward,” said HSBC economist Olivier Vigna in a research note.

The drop offers the first picture of consumer morale since unions launched strikes on Dec. 5 aimed at forcing the government to ditch plans to set up a points-based pension scheme in the biggest overhaul of the system since World War II.

Though participation has waned, the strike is now the longest since 1968 and remains a major headache for commuters trying to get to work and consumers wanting to go shopping.

Consumers reported in INSEE’s monthly poll that their outlook for the general economic situation and their own personal finances over the next year was the lowest since April.

Many retail shops, cafes and hotels have reported a sharp drop in business during the crunch holiday period, a time when many make a large chunk of their annual income.

It is all the more painful for them as it is the second weak holiday period in a row after business suffered at the end of 2018 due to the waves violent street protests last year that kept many shoppers at home.

Agencies