Germany hit by sharp drop in factory orders

GERMAN factories suffered a surprise plunge in orders in April as growth in Europe’s largest economy is brought to a halt by China’s zero-covid policy and Russia’s invasion of Ukraine.

Factory orders in Germany unexpectedly slumped 2.7pc compared to the previous month, a third straight tumble in companies’ worst run since Covid first struck.

Its huge manufacturing base also endured the biggest year-on-year drop in almost two years as orders fell 6.2pc.

The stalling performance of its outsized manufacturing industry is expected to cause the German economy to flatline in the second quarter.

The German economy ministry said the conflict in Ukraine “continues to lead to weak demand, especially from abroad”, while forecasters blamed Chinese lockdowns on the latest slump. Global supply chain bottlenecks have also caused problems for the manufacturing sector as Beijing’s zero-covid stance worsens port congestion.

Ralph Solveen, a Commerzbank economist, declared that the German “order boom is over” after demand from China “weakened significantly”.

He said: “For the overall economy, this will partially neutralise the positive effect of the abolition of the corona restrictions. As a result, the German economy is unlikely to expand in the second quarter.”

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the “data aren’t pretty” and “send a clear signal that demand in German manufacturing is now weakening”. However, he added that the headwinds from China and Ukraine “are now fading a little bit, at least compared to the initial shocks”.

The threat of Russian gas supplies being cut off abruptly or further increases in energy costs are a further risk for Germany’s manufacturers and its economy.