Headine Fall Blurs EZ / Investment-Driven 'Core' Recovery

German factory orders declined 0.2% M/M in April, softer than the +0.6% expected and there was also a downward revision to the March print of -0.4pp to -0.8% M/M. The underlying 'core' measure pointed towads some recovery, though.

• Factory orders also declined on a Y/Y basis, by 1.6% (vs +0.3% cons; -2.4% prior, revised from -1.9%), with the renewed improvement in the annual comparison due to base effects.
• Core (ex-large ticket items) orders, a better measure of underlying activity, jumped 2.9% M/M in April (vs -0.1% prior, revised from +0.1%); its less volatile 3M/3M measure also printed stronger than before, at -1.3% in the 3-months to April (-2.4% prior) but this measure remained in negative territory for the 24th consecutive month.
• The breakdown showed the 'core' rise was driven by investment and non-durable goods orders, which came in at +5.2% M/M (vs +0.5% prior; highest rate since the 2020 pandemic recovery) and +4.0% M/M (vs +1.5% prior), respectively. Durable goods orders meanwhile dragged the overall print lower, at -4.3% M/M (vs +3.9% prior).
• Looking at an international split, domestic 'core' orders increased 0.7% M/M (vs -2.2% prior), while foreign orders jumped 4.5% M/M (vs +1.2% prior), driven by EZ orders at +7.4% M/M (vs +2.0% prior).
• Real manufacturing turnover meanwhile decreased 0.9% M/M in April (-0.4% prior, revised from -0.7%), opening up some slight downside risks to the consensus forecast of +0.2% M/M re April's factory orders data.
• Overall, the data adds to the view that there seems to be a gradual recovery of German economic activity forming - but that this recovery is, to a significant extent, externally-driven.

MNI, Destatis