German Manufacturing Sector Sees Significant Increase in Orders

The German manufacturing sector has experienced a surprising uptick in orders as the year concluded, offering a glimmer of hope for an industry that has faced significant challenges. According to the Federal Statistical Office (Destatis) in Wiesbaden, orders in the manufacturing sector rose by 6.9 percent in December compared to the previous month. Analysts had anticipated a growth, but their expectations were modest, averaging a mere 2.0 percent increase.

However, it's important to note that this surge was somewhat influenced by large orders, which skewed the overall figures. Without the impact of these large contracts, the monthly increase would have been a more modest 2.2 percent.

This positive development comes after two consecutive months of decline, where orders had fallen by a revised 5.2 percent in November and by 1.5 percent in October. On a broader scale, the year 2024 saw an overall decrease in orders for the manufacturing sector, with a reported decline of 3.0 percent compared to the previous year.

When examining the data year-on-year, the December figures also showed a more favorable outcome than expected. The Federal Office reported a year-over-year decline of 6.3 percent, significantly better than the forecasted drop of 10.5 percent by analysts.

The sluggish performance of the manufacturing sector has been a critical factor contributing to the overall economic slowdown in Germany. The country has faced a contraction in economic output for the second consecutive year, prompting the government to revise its economic growth forecast for 2025. The new projection anticipates a minimal growth rate of 0.3 percent, a significant reduction from an earlier estimate of 1.1 percent for the gross domestic product.

Economist Thomas Gitzel, Chief Economist at VP Bank, characterized the increase in orders as a positive sign towards the end of the year, noting that even the details of the report were encouraging. Nonetheless, he emphasized that the overall picture of the past year remains disappointing, indicating that no significant trend reversal has occurred.