German engineering companies’ export orders in January were 47 per cent down on a year earlier, offering the first indication of how Europe’s largest economy performed at the start of this year.
Overall industrial machinery orders were 42 per cent lower than in January 2008, said VDMA, the industry association. Domestic orders were 31 per cent lower, but foreign orders fell 47 per cent.
The sharp fall illustrates the link between Germany’s heavily export-dependent economy and the slowdown in emerging economies, including eastern Europe, as well as traditional markets.
Along with Japan, Germany has been one of the large economies worst affected by the collapse in economic confidence that ricocheted around the world after the failure of Lehman Brothers last September.
Machine-tool exports have helped to power Germany’s economic growth in recent years but have been hit by the freezing of companies’ investment plans.
“Everything I have seen suggests that the crisis intensified at the start of the year,” said Thomas Köbel, an economist at SEB bank. “Companies will be wary about investing until they see some indications of stability returning – and that wariness is clear in the machine-tool orders figures.”
However, there was some evidence that the worst might be over in terms of the pace at which orders are falling.
January’s orders were only 4.5 per cent lower than in December on a seasonally adjusted basis. That compared with double-digit contractions in the months immediately following Lehman’s collapse.
Dirk Schumacher, an economist at Goldman Sachs in Frankfurt, said such trends would support the view that Germany’s economy reached a “trough” in the final quarter of 2008, when gross domestic product had contracted by 2.1 per cent.
Germany’s difficulties provide a gloomy backdrop to today’s European Central Bank interest rate-setting meeting, which is expected to see deep downward revisions in its eurozone growth and inflation forecasts.
The ECB is expected to cut its main interest rate by another half percentage point to 1.5 per cent – its lowest ever – although many private-sector economists believe that the central bank should lower rates even further.
The pace at which the 16-country eurozone is contracting may have accelerated at the start of this year, according to revised purchasing managers’ indices for the region.
The “composite” index covering manufacturing and services, which fell from 38.3 in January to 36.2 in February, would be consistent with first-quarter eurozone GDP dropping by as much as 1.8 per cent, according to Markit, which produces the survey. An index reading of below 50 signals contraction.
“The downturn continues to be led by manufacturing, driven principally by plunging exports,” said Chris Williamson, Markit’s chief economist.
4 Mar 2009 10:17pm
Source: Financial Times