German Factory Orders Drop 10.6% Amid Energy Costs

German factory orders fell 10.6% in August, a decline significantly steeper than the 1.0% drop economists had anticipated. The Statistisches Bundesamt reported that the downturn was primarily driven by a 61.5% monthly collapse in demand for transport equipment, including aircraft, ships, trains, and military vehicles, following a surge in July.

Manufacturers are facing mounting pressure from elevated energy costs linked to the ongoing conflict in Iran and tighter financial conditions resulting from interest rate hikes by the European Central Bank. Natural gas and electricity prices reached their highest levels since late 2022 in mid-September.

Despite the August slump, some indicators suggest resilience. S&P Global reported a jump in manufacturing sentiment in September to its highest level since May 2023.