Germany Factory Orders Rebound in May, Driven by Large Industrial Contracts

Germany’s factory orders rebounded in May, supported by a sharp increase in large industrial contracts, offering signs of resilience in Europe’s largest manufacturing economy despite continued weakness in some key sectors.

According to the Federal Statistical Office (Destatis), new factory orders increased 1.9% month over month in May, recovering from a downwardly revised 3.2% decline in April and exceeding economists’ expectations for a 1.2% gain.

The monthly improvement was largely driven by a surge in large-scale orders for aircraft, ships, trains and military vehicles, which climbed 85.0% compared with the previous month.

Additional gains were recorded in electrical equipment, where orders rose 5.7%, and mechanical engineering, which advanced 3.7%.

Not all manufacturing segments participated in the recovery. Orders in the automotive industry declined 3.8%, while demand for data processing, electronic and optical products fell 7.8%, highlighting uneven conditions across Germany’s industrial base.

By product category, orders for capital goods increased 2.2%, while consumer goods and intermediate goods rose 2.4% and 1.4%, respectively.

Euro Area Demand Strengthens

Foreign demand continued to support overall activity, with international orders rising 2.2% during the month.

Orders from euro area countries jumped 11.2%, more than offsetting a 3.2% decline in demand from non-euro area markets. Domestic orders also posted moderate growth, increasing 1.3%.

Excluding the impact of unusually large contracts—which can introduce significant monthly volatility—factory orders still rose a solid 1.0%, suggesting underlying demand remained positive.

Three-Month Trend Remains Mixed

Despite the stronger monthly reading, the broader trend remained more subdued.

On a less volatile three-month basis, new orders between March and May edged 0.2% lower compared with the previous three-month period. However, excluding large-scale contracts, orders increased 4.1%, indicating underlying manufacturing demand was stronger than the headline figure suggests.

The latest data point to continued stabilization in Germany’s industrial sector, although performance remains uneven across industries. Large infrastructure and defense-related contracts continue to provide support, while automotive manufacturing and technology-related sectors face a more challenging demand environment.

Source: Federal Statistical Office (Destatis).