German Industrial Orders Surge in March as Firms Brace for Iran War Impact
German Industrial Orders and Economic Outlook Amid Iran War
By Miranda Murray and Rene Wagner
BERLIN, May 6 (Reuters) - German industrial orders rose more than expected in the first month following the outbreak of the Iran war, even when excluding volatile large-scale orders, as demand probably surged in anticipation of higher prices and potential bottlenecks.
Orders increased by 5.0% on the previous month on a seasonally and calendar-adjusted basis, the German statistics office said on Thursday, accelerating from last month's upwardly revised 1.4% rise and beating expectations of a 1.0% increase.
New orders were also 5.1% higher than in the previous month when large-scale orders were excluded, hitting the highest level recorded since February 2023.
Unexpected Bright Spot in German Industry
UNEXPECTED BRIGHT SPOT
Government and Analyst Reactions
The German economy ministry remained cautious, pointing to the energy price shock that it said may have led companies to place orders in greater numbers in March to get ahead of the even greater ripple effects from the U.S.-Israeli attack on Iran at the end of February.
Analysts called the rise a positive surprise but said sentiment indicators showed uncertainty due to the war was likely to take its toll on orders, leading to a decline in the second quarter.
Business Sentiment and Market Data
Germany's Ifo business sentiment index fell to its lowest reading since May 2020 in April, while April PMI data showed manufacturer sentiment turning negative for the first time in more than a year as firms front-loaded orders.
"The growth in order books is a bright spot for companies," said economist Michael Herzum of Union Investment. However, this should not be grounds for excessive optimism, he said, as the Iran war is barely reflected in the March data.
War Taking Its Toll on Economic Prospects
WAR TAKING ITS TOLL
Forecasts and Economic Impact
"Orders in the second quarter are likely to react negatively to this situation and will likely decline," said Commerzbank chief economist Joerg Kraemer.
Gross domestic product could also contract as a result, he said.
"The war in the Middle East is taking its toll, even if it were to end soon," Kraemer said.
Order Trends and Sector Breakdown
The less volatile three-month comparison showed that new orders were 4.1% lower, including large-scale orders, in the first quarter compared with the fourth quarter.
Excluding large-scale orders, they rose 1.6%.
Foreign orders rose by 5.6%, with those from the euro zone increasing by 10.1%, while those from other foreign markets grew by 2.7%. Domestic demand grew by 4.0%.
The positive trend was broadly distributed across almost all economic sectors, with particularly strong gains reported by makers of electrical equipment, according to the office.
(Reporting by Miranda Murray and Rene Wagner in Berlin and Tristan Veyet in Gdansk, editing by Thomas Seythal and Tomasz Janowski)
