German factory orders decline

There are growing signs that Europe’s largest economy is slowing, these are driven by the fact that manufacturing orders unexpectedly fell 1.8 percent from March.

Analysts had expected a gain of 0.4 percent, instead a reduction in output has been experienced for the fifth consecutive month, even though orders had risen by up to 15 percent at the beginning of 2008 compared to last year.

The crux of the matter is that the role of the euro has had an important part to play in the competitiveness of German factories.

During the month, foreign demand decreased by 3.8% as well as the demand from Euro Zone countries also faltering, as Germany will be hit by the slowdown in its neighbour’s economies.

Over the past year, the euro has gained 14 percent against the dollar and 17 percent against sterling, although the euro declined to $1.5380 after the factory figures were released, from $1.5403.

Outside of the currency issue, factories are experiencing record raw material and oil prices which, are in turn, pushing up the cost of products.

Inflation has also increased which has reduced the spending power of companies and households, which is the cause for the reduction of domestic demand.

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