020 7898 0500German factory orders dropped by 4% in June 2018, which was far worse than the 0.4% the markets had been expecting. It is the steepest decline in factory orders since January 2017 and is largely the result of a drop in foreign demand, although a 2.8% drop in domestic orders didn’t help matters either.
Donald Trump’s trade wars are beginning to have a real impact and it is unlikely that this is the last we will see of the effects. These things can take a while to seep through into the economy, but they certainly are doing so now. It will be hoped that a deal can be agreed between Europe and the Trump administration. It is worth noting that monthly data can be volatile, but the fact it was such a big decline does appear to suggest global trade is being affected.
We also saw construction PMI in Germany, which fell to a four-month low of 50 in July. However, business optimism did pick up from June’s seven-month low, so we should be thankful for small mercies.
The euro enjoyed a decent day against sterling following continuing Brexit fears in the UK, while movements against the dollar were fairly subdued. Today we will see industrial orders and balance of trade figures from Germany; the question is whether we will see further disappointment from the eurozone’s largest economy.
