German Factory orders declined - surprisingly - more than expected in April at -2.1% m/m. Indeed, recent economic data was on the strong side and showed that Germany was on a strong recovery road.
The Factory Orders forecast, even though negative, was way more optimistic. Markets estimated the data to slightly decline to -0.3%. We now wonder whether there is a reason to worry after the very positive first half of the year. It is anyway important to notice that the annualized data remains largely positive with a +3.5% print.
As explained above, other economic fundamentals are positive. Growth is running at a strong pace above Eurozone average at 0.6% for Q1 and the labour market is widely recovering. Unemployment has never been so low. So today’s Factory Orders seem to be contradicting the current momentum in Germany.
Amid the release of this German data, the single currency is trading mixed and remains below 1.1300. Markets are optimistic of the Eurozone recovery and continue pricing in US difficulties.
By Yann Quelenn