German Factory Orders Rose 1.9% in May on Big-Ticket Contracts

Other-Vehicle Orders Jumped 85% in May

German factory orders rose 1.9% in May from the previous month, data agency Destatis said Monday, a stronger-than-expected rebound after a 3.2% decline in April. Economists polled by The Wall Street Journal had forecast a 0.7% increase.

The gain was largely attributable to a jump in orders for “other-vehicle” construction — a category that includes aircraft, ships, trains, and military vehicles — which jumped 85% on the month, according to Destatis, driven by several large contracts.

In the less volatile three-month-on-three-month comparison, new orders from March to May were 0.2% lower than in the previous three months, Destatis said.

Germany’s manufacturers have faced a difficult backdrop this year, with elevated energy prices following the conflict between the U.S. and Iran pushing up costs and uncertainty over the global trade outlook weighing on investment decisions and export demand, according to the report.

Carsten Brzeski, global head of macro at ING, said the Middle East conflict has provided a partial boost to German manufacturing. “The initial support came from stockpiling and more recently, some companies have benefited from Asian competitors being more exposed to disruptions affecting trade routes through the Strait of Hormuz,” he said.

Marco Wagner, senior economist at Commerzbank, said momentum in German industry is expected to remain weak despite the May rebound. “On the one hand, the Iran conflict remains a source of uncertainty, and peace is far from a done deal. On the other hand, German companies continue to suffer from an erosion of the country’s competitiveness,” he said.

German industry is also expected to benefit over the medium term from the country’s planned infrastructure and defense spending program, valued at more than $1 trillion over the coming years, although economists expect the impact to emerge only gradually.

The figures come after the European Central Bank raised interest rates last month, with policymakers not yet ruling out another hike as they assess the broader price impact of the energy shock from the war in Iran.