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Aline Schuiling, senior economist at ABN AMRO, suggests that even though the Germany’s factory orders and industrial production data improved in March, but the details of the two reports, as well as sentiment indicators signal that the tide in the sector has not yet turned and weakness continues.

Key Quotes

“Factory orders increased by 0.6% mom in March, which is very modest considering that it followed upon two consecutive monthly drops of 6% in total. As a result, during Q1 as a whole, orders dropped by more than 4% qoq.”

“Turning to industrial production, which rose by 0.5% mom in March after 0.4% in February, the details also point at ongoing weakness in manufacturing.”

“Finally, the Ifo business climate in manufacturing dropped again markedly in April and the manufacturing PMI remained well below the 50 boom-bust mark, indicating ongoing weakness in the sector.”

“All in all, we think Germany’s manufacturing sector will remain sluggish in the coming months. Indeed, output is likely to decline significantly going forward as it catches up with the weakness in orders and in business surveys. Later in the year, it should pick up on the back of a modest improvement in global trade.”