German Engineering Orders Rise for Second Month Due to Foreign Demand

Key Takeaways

• German engineering orders increased by 7% year-on-year in November, driven by a 20% rise in orders from outside the euro zone.
• Foreign orders surged by 14%, while domestic orders fell by 9%.
• VDMA's chief economist emphasized the need for policy reforms to boost domestic demand.
• From September to November, there was a 3% overall drop in orders.

What Happened?

In November, German engineering firms experienced a 7% year-on-year increase in orders, primarily due to a 20% rise in demand from countries outside the euro zone, according to the VDMA engineering association.

What Are the Implications for Domestic Demand?

Domestic orders declined by 9%, highlighting a need for policy measures to stimulate internal demand. VDMA chief economist Johannes Gernandt urged policymakers to implement reforms such as reducing corporate taxes and easing bureaucratic constraints.

How Did Foreign Demand Influence the Market?

Foreign orders increased by 14%, compensating for the domestic market's weakness. This surge was driven by large-scale facility orders from outside the euro zone, emphasizing the global demand for German engineering.

What Is the Outlook for Future Orders?

For the three-month period from September to November, orders fell by 3%, with a 4% decline in foreign orders and a 2% decrease domestically. VDMA's Gernandt noted that no significant momentum is expected in the near term.

Expert Analysis

The continued rise in foreign demand underscores the global reliance on German engineering, yet domestic challenges persist. Policy reforms are crucial to balance this growth and ensure sustainable development in the domestic market.

Frequently Asked Questions

What is the VDMA?

The VDMA, or the German Engineering Federation, is an industry association representing the interests of German engineering companies, providing economic data and advocating for policy reforms.

Why is foreign demand important for German engineering?

Foreign demand is crucial as it offsets domestic market weaknesses, ensuring steady growth and highlighting the global competitiveness of German engineering products.

What reforms are suggested by VDMA?

VDMA suggests reforms including lower corporate taxes, pension reform, reducing bureaucracy, and creating a more flexible labor market to boost domestic demand.