German Factory Orders Plunge in March, Adding to Recession Fears

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New figures from Germany's federal statistics authority Destatis show that industrial orders at German factories fell 10.7 percent in March, the largest drop since the Covid pandemic began in 2020. This decline has raised concerns about a looming recession in Europe's largest economy, with foreign orders plummeting by 13.3 percent and domestic orders by 6.8 percent.

The sharp decline is far worse than the 2.8 percent decrease predicted by analysts, and it comes as other European economies are also facing economic challenges. In France, for example, industrial production fell by 1.1 percent in March, contributing to a sluggish growth forecast of just 0.2 percent for the second quarter. Meanwhile, the European Central Bank has raised its benchmark interest rates further, aiming to balance inflation control with economic growth across the eurozone.

Economists are divided on what the future holds for Germany's economy, with some suggesting that the recent decline in factory orders is a warning sign for investors. Berenberg Bank economist Holger Schmieding said that the drop "clouds the outlook for German manufacturing," while LBBW bank economist Jens-Oliver Niklasch called it "a real recession signal." However, others have pointed out that the situation is mixed, with factory orders for the first quarter of the year showing a slight increase from the end of 2022.

The German government has also noted that new orders have been "very volatile" lately, and key business sentiment indicators remain on an upward trend that began late last year. Still, the recent decline in factory orders is cause for concern and underscores the ongoing challenges facing Germany and other European economies as they navigate a post-pandemic world.

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