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In view of Aline Schuiling, Senior Economist at ABN AMRO, German factory orders for September confirm that the Eurozone manufacturing sector has remained sluggish moving into Q4.

Key Quotes

“Germany’s orders increased by 0.3% mom in September, which was stronger than expected and followed upon a 2.5% mom jump in August. Still, the monthly orders data is very volatile and during the third quarter as a whole, orders declined by 1% qoq, after they fell by 1.6% Q2 and 2.3% in Q1.”

“Compared to a year ago, orders were down by more than 2% in September, which is the lowest since mid-2016. The detailed orders data show that the weakness began in foreign orders from outside the eurozone at the start of the year, but that the declines became wide spread amongst all components during the course of the year.”

“In fact, in Q3, the strongest drops were in capital goods orders from foreign countries within the eurozone (down by almost 6% qoq in Q3), as well as in domestic orders for consumer goods (down by almost 5% qoq). The latter seems due to the distortions in Germany’s car production and demand due to the problems with the new emission testing standards.”

“Although car production should pick up again the coming months, it seems the weakness in eurozone manufacturing is more persistent, and related to weakening global trade growth. This view is underlined by the fact that the new exports orders component of the eurozone manufacturing PMI fell to its lowest level since early 2013 in October.”