German industry received record levels of new orders in July thanks to large orders from abroad. Compared to June, orders increased by 3.4%, as reported by the Federal Statistical Office in Wiesbaden on Monday. Analysts, however, had expected a decline of 0.7% on average. According to the statisticians, incoming orders have thus risen to their highest level since the beginning of the time series in 1991.

However, economists point out that the supply bottlenecks could make it difficult to process the surge in orders on time and ultimately translate them into higher production figures. "You could say: the whole world needs German goods, but Germany can't deliver," explained Jens-Oliver Niklasch, economist at Landesbank Baden-Württemberg. The background to this is the combination of strong demand due to the economic recovery from the coronavirus slump and ongoing supply difficulties in global trade, which are leading to a significant shortage of materials.

Large orders ensure full order books

The significant increase in orders in July was mainly due to large orders. Excluding this component, orders fell by 0.2% month-on-month. Orders from outside the eurozone rose particularly sharply by 15.7%, particularly in the shipbuilding sector. In contrast, fewer orders were received from Germany and the eurozone than in the previous month. Orders for capital and consumer goods increased significantly overall, while orders for intermediate goods were slightly lower.

Despite what at first glance appear to be robust figures, economists commented on the development rather cautiously. Commerzbank expert Ralph Solveen even spoke of a "waning order boom". His argument: without orders for other vehicles such as aircraft or ships, orders would have clearly fallen in July. Even orders from outside the eurozone have come to a standstill, which is probably due in large part to the less dynamic demand from China.

According to Solveen, incoming orders are likely to be of secondary importance for the further development of industrial production and economic growth. "What will be more important is whether the supply bottlenecks for primary products can be overcome or whether they will continue to worsen." There are currently many reasons for these bottlenecks, but the effects of the coronavirus pandemic are a major brake on growth.