German Factory Orders Disappoint while German Trade Terms Improve

Highlights

• German factory orders fall short of expectations, rising by 0.3% in November.
• However, German trade terms improved, offering hope of a short-lived euro area recession.
• Eurozone retail sales and economic sentiment figures are up next.

On Monday, the German economy was in the spotlight amidst rising expectations of a euro area recession.

German Factory Orders

German factory orders increased by 0.3% in November, partially reversing a 3.8% tumble in October. Economists forecast a 1.0% rise in factory orders.

According to Destatis,

• New orders exclusive of large-scale orders declined by 0.6%.
• Orders for capital goods and consumer goods increased by 0.8% and 1.1%, respectively.
• Domestic orders increased by 1.4%, while orders from overseas declined by 0.4%.
• Significantly, orders from the euro area slid by 1.9%, while orders from the rest of the world increased by 0.6%.

German Trade

The German trade surplus widened from €17.7 billion to €20.4 billion in November. Economists forecast a trade surplus of €17.9 billion.

According to Destatis,

• Exports increased by 3.7% in November after declining by 0.4% in October. However, exports were down 5.0% year-over-year.
• Imports rose by 1.9% in November after falling by 1.1% in October. However, imports were down 12.2% year-over-year.
• Exports to EU countries increased by 5.4%, with imports increasing by 2.8%.
• To non-EU countries, exports increased by 1.8%, with imports up 0.8%. German exports mostly went to the US.
• However, exports to China increased by 3.1%, with exports to the UK surging 15.2%.
• China accounted for the largest component of German imports. Imports from China rose by 3.1%, with imports from the US and UK rising by 3.0% and 6.3%, respectively.

German Economic Indicators Send Mixed Signals

Factory orders steadied after the sizeable decline in October but were lackluster midway through Q4 2023. However, improving trade terms could ease investor jitters of a prolonged euro area economic recession. Rising demand from China was a significant highlight in the November report.

EUR/USD Reaction to the Economic Indicators from Germany

Before the German economic indicators, the EUR/USD rose to a high of $1.09530 before falling to a low of $1.09305.

However, the EUR/USD responded to the stats, falling to a low of $1.09419 before rising to $1.09522.

On Monday, the EUR/USD was up 0.10% to $1.09519.

Next Up

On Monday, economic indicators for the Eurozone will garner investor interest. Eurozone retail sales and economic sentiment figures will be in focus. Recent retail sales figures from Germany suggest a marked decline in euro-area consumer spending. A larger-than-expected fall in retail sales could refuel recessionary jitters.

However, better-than-expected economic sentiment numbers for December could cushion the impact.

Economists forecast retail sales to fall by 0.3% in November after rising by 0.1% in October. Significantly, economists expect economic sentiment to rise from 93.8 to 94.1 in December.

US Inflation Expectations and the Fed

Later in the Monday session, US consumer inflation expectations will draw investor interest. It is inflation week, with the US CPI Report and US producer prices out on Thursday and Friday.

Investors could show greater sensitivity to the December report as the markets stick to bets on a Q1 Fed rate cut.

Economists forecast Consumer Inflation Expectations to slip from 3.4% to 3.3%.

While the numbers need consideration, investors must monitor Fed speakers. FOMC voting member Raphael Bostic is on the calendar to speak on Monday.