German industrial orders unexpectedly fall in June on subdued foreign demand

By Miranda Murray

BERLIN (Reuters) -German industrial orders unexpectedly fell in June, declining for a second straight month, due to falling demand from abroad, a trend that looks set to continue due to increased tariffs on exports to the United States, data showed on Wednesday.

Orders were down by 1% on the previous month on a seasonally and calendar adjusted basis, the federal statistics office said.

A Reuters poll of analysts had pointed to a rise of 1.0% after industrial orders fell 0.8% in May. The official May figure had been revised from an earlier estimate of a 1.4% drop.

Foreign orders fell 3.0% on the month, while domestic ones rose 2.2%. Those from outside the euro zone dropped 7.8%, while inside the euro zone, they grew by 5.2%.

"The decline in orders from outside the euro zone was particularly noticeable, which could be an indication of U.S. tariffs taking effect," said Commerzbank senior economist Vincent Stamer.

"This means that an upturn in industrial orders is still a long way off."

The new U.S. tariffs of 15% on goods from the European Union, which come into effect Thursday, are making German-made goods more expensive for its most important export customer.

The economy ministry said it was not surprising that incoming orders were subject to strong fluctuations given the high levels of trade and geopolitical uncertainty.

"In light of the now likely permanent increase in tariffs on exports to the U.S., the industrial sector is likely to be characterized by subdued foreign demand in the future," it said.

June's negative development was primarily due to a 23.1% month-on-month drop in orders for other transport equipment, such as aircraft, ships, trains, military vehicles.

Orders also fell in the automotive industry and among manufacturers of metal products.

Excluding big-ticket orders, which are often highly volatile, new orders were 0.5% higher in June than in the previous month.

The less volatile three-month on three-month comparison showed that new orders in the period from April to June were 3.1% higher than in the previous three months.

(Reporting by Rene Wagner, Miranda Murray, Daria Bogdanska and Halilcan Soran; Editing by Bernadette Baum)