German engineering orders declined in June, but the drop in demand masked strong gains in eurozone orders, industry group VDMA said Thursday.
“Demand from within the eurozone is clearly recovering and we expect this trend to continue in the coming months,” said Olaf Wortmann, economist at VDMA, which represents more than 3,000 midsize companies. Eurozone orders jumped 12% in June from the year-earlier period.
U.S. demand is also picking up and the country has overtaken China as the biggest trading partner of German engineering firms, Mr. Wortmann said. “That is also due to a weaker euro exchange rate” that makes German goods more competitive outside the eurozone, he added.
Total orders for Germany’s plant and machinery industry in June declined 4% from the year-earlier period. Domestic orders rose 7%, but VDMA said that a collapse in demand from outside the eurozone depressed the overall result.
Orders from outside the eurozone slumped 15% because of a “base effect”, as there was a high volume of big ticket orders in June 2014, Mr. Wortmann said.
VDMA earlier in July slashed its production forecasts for 2015 following “serious downward revisions” in the official machinery production indexes by Germany’s federal statistics office.
Plant and machinery production in the first five months of this year was down 2.5% from the same period a year ago, VDMA said. It now predicts 2015 engineering output to be flat, in price-adjusted terms, well below its previous forecast of a 2% increase.