Trade spats weigh on German manufacturers

By BLOOMBERG

FRANKFURT • German manufacturers took a hit in June as a slide in overseas demand knocked factory orders amid escalating trade tensions.

Orders fell 4% from the previous month — eight times as much as forecast in a Bloomberg survey of economists — and the 0.8% drop from a year ago was the first annual decline since July 2016. The Economy Ministry acknowledged that “uncertainty from trade policy played a role” as demand from non-eurozone countries led the slide.

While the figures pre-date last month’s agreement by the US and European Union to hold off from further tariffs as long as negotiations are ongoing, they highlight the potential for trade spats to dent Europe’s largest economy. German business sentiment has been eroded since the turn of the year, with companies expressing concern over the outlook.

BMW AG joined automakers from around the world last week in warning that trade tensions could drag down profits in the coming months.

The company is also worried about escalating US-China trade threats as it ships SUVs to China from its South Carolina plant.

“Today’s new orders data do not bode well for German industry going into the second half of the year (2H18),” said Carsten Brzeski, chief economist at ING-Diba in Frankfurt.

The Economy Ministry’s report showed overseas orders fell 4.7% in June, with demand from non-eurozone nations slumping 5.9%. Worrying signs also came from investment goods — which slipped 4.7% — and a 2.8% drop in domestic orders. Total orders sank 1.5% in 1H18.