German industrial woes deepen with sharpest fall in orders since January

German factories recorded their sharpest drop in new orders for seven months in August, further evidence of a worrying slowdown in Europe’s largest manufacturing sector.

The national statistics agency Destatis said Monday that incoming orders fell by 5.8 percent in August, leaving them down 3.9 percent on the year. Analysts had expected a 1.9 percent decline.

The poor result can in part be explained by the fact that the month before, there had been a number of large orders in categories like aircraft, trains and military vehicles, said the agency. Excluding these, orders fell by only 3.4 percent.

One bright spot was that July’s gain was revised up to 3.9 percent from a first reading of 2.9 percent.

A combination of high energy prices and increased competition from abroad — mainly China — has weighed on the country’s manufacturing sector. The sectoral purchasing managers’ index compiled by S&P Global has been in negative territory for over two years now.

The slowdown is particularly acute in the automotive sector. A separate data reading from Monday shows that car sales were down 4.7 percent on the year in the half of 2024.

On Friday, European Union capitals voted to to impose duties on Made-in-China electric vehicles, in an effort to counter Chinese subsidies and to protect its own lagging industry. Germany, which counts China as one of its largest export destinations, voted against.

The high share of manufacturing in overall German output means that the economy is likely to contract for a second year running this year. A joint report by five of the country’s leading think-tanks suggests it will shrink 0.1 percent in 2024 before returning to growth in the following two years.