FX.co ★ Germany’s manufacturing backbone shows signs of strain

The German economy has been hit by yet another crisis. According to Destatis, the federal statistics office, orders in the country’s manufacturing sector have plummeted by a staggering 5.8%. This calls for urgent action to stabilize Europe’s largest economy.

Data from Destatis showed that German manufacturing orders fell by 5.8% in August compared to the previous month. Local factories recorded the sharpest drop in orders since the beginning of 2024, highlighting the growing crisis. According to the agency, this signals a significant downturn, marking a critical challenge for the economic powerhouse of the euro area.

The year-over-year comparison was not encouraging either, with orders down by 3.9%, underscoring the depth of the problem. In July, by contrast, the overall trend for German orders was positive. In midsummer, manufacturing orders increased by 3.9% month-on-month and 4.6% year-on-year.

The August slump can be attributed to several factors, according to Destatis analysts. The most significant one was an influx of major orders in July, including contracts for ships, aircraft, rail transport, and military equipment. Excluding these large-scale orders, orders in August would have been 3.4% lower than in July. Another key factor was a steep 10.5% decline in orders from eurozone countries.

Adding to growing economic concerns, Bloomberg recently reported a surge in German unemployment. In the first month of autumn, the number of unemployed rose by 17,000, far exceeding analysts' predictions of a 3,500 increase. This spike largely stems from a severe shortage of skilled labor in critical sectors such as chemicals, automotive manufacturing, and electrical equipment.