German orders surge in June, driven by high demand

German orders surge in June, driven by high demand

Currently a steel worker of the German industrial conglomerate ThyssenKrupp AG stands amid sparks of raw iron from a furnace at Germany's largest steel factory in Duisburg.

BERLIN - Domestic orders rose in June more than expected, data showed on Thursday. It was driven by bookings for large industrial items, mainly from German customers.

The figures published by the Federal Statistics Office showed orders for goods 'Made in Germany" jumped on the month to averaged terms.

This easily beat a Reuters forecast of a 1.9% increase and followed a drop of 3.2% in May, revised from a decrease of 3.7%.

Excluding new orders, major orders in manufacturing rose 1.7% on the month.

Domestic orders soared nearly 10%, with producers of data processing equipment, lens systems, planes and ships benefiting from unusually strong demand, the Economy Ministry said.

Also important orders in the automotive sector rose, added the ministry.

The German economy returned to growth in the second quarter but bounced back less strongly than expected as manufacturers struggle to get intermediate goods and building materials to ramp up production.

Although the order backlog is high, it cannot be processed quickly due to ongoing storage bottlenecks for intermediate products and materials, Bastian Hepperle said analyst Bankhaus Lampe.

In a further sign that high orders are currently not translating into higher output, real turnover in manufacturing fell in calendar and seasonally adjusted terms in June (Saskotically). At the end of the year, real turnover rose by 8.6%.

The supply bottlenecks in manufacturing will continue to hold back production, so industry is likely to slow down the economic recovery in the third quarter as well, Hepperle added.

Undersupply of semiconductors is leading to production downtimes in the automotive industry and many other industrial sectors.

But the shortage of skilled workers is also becoming more and more noticeable, VP Bank economist Thomas Gitzel said.

The current recovery is supported by strong retail sales which jumped in May and June following the lifting of COVID 19 restrictions.

A survey on Wednesday indicated that domestic demand remains high, with activity in the service sector growing at the fastest pace on record in July.