Boom in defence spending lifts German factory orders

"Factory orders in long-struggling Germany unexpectedly posted a sharp jump in November, boosted by higher demand for defence equipment as Europe rushes to rearm, official data showed Thursday. New orders increased 5.6 percent month-on-month, according to preliminary figures from statistics agency Destatis, the third straight monthly increase. Analysts surveyed by the financial data firm FactSet had expected a decline of 1.3 percent. Russia's invasion of Ukraine has prompted Germany and other European countries to start re-arming, with Chancellor Friedrich Merz vowing to unleash hundreds of billions of euros on defence."

"Demand for defence equipment has lifted orders in recent months, the economy ministry noted in a statement. "The trend of increasing demand from Germany and the eurozone is continuing," it said. The jump in orders is some positive news for Europe's biggest economy, which is struggling through a long decline due to a manufacturing slump, high energy costs and weak demand in key export markets."

"LBBW bank analyst Jens-Oliver Niklasch said the higher orders overall were "a real sign of a possible turnaround in the economy". He cautioned that higher defence spending "in itself will not generate permanently higher growth potential" but said it was nevertheless important that "there is finally a sign of life from industry". November's figures were lifted by large-scale orders in the category for transport equipment including military vehicles, aircraft, ships and trains, according to Destatis."

Factory orders in Germany rose 5.6 percent month-on-month in November, marking the third consecutive monthly increase. Demand for defence equipment significantly boosted the rise, with large-scale orders for military vehicles, aircraft, ships and trains. Domestic orders climbed 6.5 percent while foreign orders rose almost five percent, led by an over eight percent increase from the euro area. Electrical and IT equipment and machine tool orders also contributed to the gains. Analysts say higher defence spending may signal a potential economic turnaround but caution it will not by itself create permanently higher growth potential. Manufacturing slump and high energy costs continue to weigh on the economy.

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