German Manufacturing Orders Surge to Decade High, Experts Urge Caution

German manufacturing companies experienced a significant surge in orders during May, reaching the fullest order books recorded in more than ten years. This robust demand, particularly from the mechanical engineering sector, signals a potential upswing for the industry.

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The high backlog only has value if it translates into production.

The Federal Statistical Office reported that, after seasonal and calendar adjustments, the volume of orders grew by 1.7 percent compared to April. This marks the strongest monthly increase since September 2021, a period influenced by post-pandemic recovery effects. The current level of filled order books is the highest since the statistics began in 2015.

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Also because of the renewed tensions in the Middle East, orders are likely to continue to pile up for the time being.

Despite the positive figures, economists are urging caution. Alexander Krüger, chief economist at Bank Bethmann HAL, highlighted that the value of these order backlogs is contingent on their conversion into actual production. He noted that companies may remain hesitant due to challenging location conditions and increased energy prices, despite government reform packages. Krüger also pointed to a trend of companies increasing production abroad rather than in Germany and cited ongoing global conflicts, such as tensions in the Middle East, as factors contributing to order backlogs and potential supply chain disruptions that could hinder production.

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Supply bottlenecks are slowing down production.