German economy panic: Orders plummet suddenly as export squeeze bites – sharp decline

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German industries received 6.9 percent fewer orders in October than in September, a fall caused by a decrease in foreign interest. The drop in demand follows two consecutive months showing the same trend.

The Federal Ministry of Economics in Berlin warned the latest slump would damage the country financially.

A spokesperson said: “The second sharp decline in incoming orders within the last three months means a further damper for the economic outlook.”

Capital goods such as machines saw the sharpest fall in demand, followed by intermediate goods. Consumer goods purchases, meanwhile, increased noticeably.

The dip in orders in October was mainly caused by fewer exports – 13.1 percent less than in September. The drop was particularly sharp in trade with non-EU countries, which fell by 18.1 percent.

The Federal Office attributes this to a 15.6 percent rise in large orders in September from abroad. However, overall, exports also dropped from August to September, even if only 0.7 percent.

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A breakdown of year-on-year trade data shows German exports to the UK plunged by 10 percent to 5.7 billion euros while exports to China fell by 0.2 percent on the year to 8.5 billion euros.

Exports to the US, however, jumped 16.2 percent on the year, to 10.8 billion euros.

Germany’s economy ministry in October cut its exports growth forecast for the year from the 9.2 percent it had predicted in April to a more modest 8.6 percent.

This was linked by the government to a “historically unique shortage of intermediate goods” in the manufacturing sector – a sign that global supply chain disruptions are an issue even for Europe’s largest economy.

Domestic orders, on the other hand, increased by 3.4 percent from September to October. But even so, the significant decline in exports in the past few months is hindering Germany’s economic recovery.

Olaf Scholz, who is set to be sworn in as German chancellor on Wednesday, will be busy working on a bruised economy.

The plummeting of factory orders adds to a housing crisis and, naturally, the coronavirus pandemic.

In their campaign, the Social Democrats promised to make affordable housing happen once and for all.

The capital Berlin has seen its rents about double on average in the last decade, and analysis from cost-of-living calculator Numbeo shows incomes have not grown accordingly.

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Residents have thus had to spend more of their earnings on housing, with less left for other types of consumption and saving.

Mr Scholz’s incoming government has vowed to build 400,000 new housing units every year, 100,000 of which is to be publicly subsidized.

This is 50,000 more units than the current goal, and about 100,000 more than the construction sector has managed to build to date.

While the agreement reached by Germany’s traffic light coalition means a fourfold increase for citizens receiving subsidies, for Scholz’s cabinet it is a challenging pledge.

How to materialise it is one of the early tasks with which the Social Democrats, Greens and Free Democrats can prove their alliance works.

COVID-19, of course, will be a top priority, too.

The incoming government plans to make vaccinations compulsory for people working in hospitals, nursing homes and other medical practices starting on March 16.

Further, Mr Scholz last week said he backed a mandatory scheme. He claimed: “As a delegate I would certainly vote in favour, to make that very clear.”

The protests in response to renewed lockdowns in recent weeks hint at divisive reactions to any new coronavirus measures.

To help battle Covid, the nation will count on the help of epidemiologist Karl Lauterbach, who in the nearly last two years has become a source of knowledge to Germans when it comes to the science behind the pandemic.

A physician with two doctorates and a professorship, his appointment came as no big surprise.

Announcing him as the new health minister, Mr Scholz said at the presentation of the Social Democratic ministerial candidates in Berlin last Tuesday: “Most citizens wanted the next health minister to be someone from the field, someone who can do the job really well, and someone with the name Karl Lauterbach.”

“He will be.”

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