German factory orders unexpectedly surged in December, official data showed on Tuesday, raising hopes that the slowdown in manufacturing in Europe's largest economy is bottoming out.
According to the Federal Statistical Office Destatis, new orders, which are closely watched as an indicator of future business activity, increased by 8.9% month-on-month after stagnating in November.
Analysts surveyed by FactSet had expected a slight decline.
Destatis said the unexpected rebound was driven by several big-ticket items, with orders increasing 110% in the “other vehicle manufacturing” sector, which includes planes and trains.
The electrical equipment manufacturing industry also saw a significant increase in orders, as did metal products and pharmaceuticals.
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On the other hand, orders for automobiles and chemical products decreased.
Comparing the less volatile past three months, industrial orders rose by just 0.1%, Destatis said.
For the full year of 2023, orders decreased by 5.9% compared to the previous year.
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Nevertheless, ING Bank economist Carsten Brzeski said December's rise “gives hope that the downward trend in German industry is finally bottoming out.”
But he added that “many more of these positive data releases will be needed to demonstrate a significant recovery in the economy.”
In recent months, high inflation, expensive energy and weak demand in China, a major market, have weighed heavily on Germany's vital manufacturing sector.
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The industrial slowdown is contributing to the worsening of the German economy, which is expected to contract by 0.3% in 2023.
Germany's Bundesbank expects a gradual economic recovery to begin in 2024, with growth expected to be 0.4% as inflation eases and demand rises.
