German Factory Orders Plummet as War Weighs on Manufacturers

(Bloomberg) -- German factory orders fell more than anticipated after Russia’s invasion of Ukraine darkened the prospects for the economy by adding to inflation pressure and disrupting global supply chains.

Demand plunged 4.7% in March from the previous month, driven by a decline in orders from broad. That’s worse than all but one forecast in a survey of economists by Bloomberg, where the median estimate was for a 1.1% drop. 

Expectations for growth in Europe’s largest economy have been slashed since the war erupted at the end of February as Germany’s key manufacturers endure soaring costs and dwindling availability for components.

The heightened uncertainty related to the war in Ukraine “is reflected in significantly more restrained demand, especially from non-euro area countries,” Germany’s Economy Ministry said in a separate statement. “The outlook for the coming months is currently muted.”

The European Union’s plans for weaning the bloc off Russian oil are set to keep prices elevated, further denting household spending power. Industry trade group BDI warned Wednesday that supplies from the country can be replaced, but only at additional costs.

A disruption to natural-gas flows from Russia would present a much greater danger because those deliveries couldn’t immediately be replaced. The Bundesbank says activity is at risk of shrinking nearly 2% in 2022 if a complete energy embargo leads to restrictions on power providers and industry. 

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