German factory orders slip in November

German factory orders unexpectedly slipped in November, according to data released by Destatis.

Factory orders fell 0.4% following a 0.7% jump the month before, missing expectations for no change. On the year, however, orders were up 8.7% compared to a 6.9% gain in October and ahead of expectations for a 7.8% increase.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "This is better than we expected. The consensus didn’t factor that even a big month-to-month drop would produce a higher year-over-year rate due to base effects. The overall picture is that momentum in new orders is improving in line with the upbeat surveys.

"The headline was constrained by 0.4% and 0.5% month-to-month dips in domestic and export orders, respectively, but new doers to the rest of the EZ economies rose 1.2%. This chimes with the story of a continued strong cyclical upturn in the wider euro area economy at the end of last year. Across sectors, capital goods orders fell following a recent string of gains but momentum in intermediate and consumer goods picked up."

Meanwhile, Barclays said the slowdown was the first sign of an economic impact from Germany's political uncertainty since the 2017 election.

"While uncertainty about the formation of a government will remain elevated as long as talks continue as the parties have different points of view on key issues and will likely negotiate very carefully given their historically low approval ratings, the baseline for our economic forecasts is for the CDU/CSU and SPD to eventually form a Grand Coalition, although a number of key hurdles still remain.

"The SPD membership could agree to the coalition treaty by the middle of February, which would mean that political uncertainty could be resolved shortly thereafter. Nevertheless, the global economic recovery should continue to support Germany’s economy and we do not yet expect this uncertainty to be reflected in real GDP growth data. Overall, we see November Factory orders as consistent with our real GDP growth forecast of 0.6% in Q4 17."