Declining German factory orders signal persistent trade uncertainty

In May, Germany's factory orders fell by 1.4% compared to the previous month, marking the first decline in four months. The drop was sharper than economists polled by Bloomberg had expected.

The downturn was primarily driven by cautious local businesses holding off on major capital expenditures amid unresolved trade tensions between the EU and the US. Domestic orders for investment goods took a particularly sharp hit, plunging 12.7%, while orders from abroad actually rose by 2.9%.

The Bundesbank's latest analysis suggests the economy could recover if trade negotiations succeed. Yet with uncertainty persisting, many firms are already scaling back their plans.

German Economics Ministry officials, commenting on the situation, noted positive long-term trends while acknowledging significant short-term volatility. Authorities emphasized that the risk of renewed demand slowdown will persist through the year-end.