German factory orders slumped in June

German factory orders fell by -3.2% in June compared to May (which had declined by -1.6%), according to figures published by Statistisches Bundesamt, the country’s Federal Statistical Office. Domestic orders fell by -1.9% while those from abroad plunged by -4.1%.

New orders from the Eurozone were -10.4% down in June compared to May.

Manufacturers of intermediate goods had a better month, registering a June increase of +1.6%. Orders for investment goods and consumer goods declined by -6.4% and -0.4% respectively.

Russian sanctions hurting Germany

The Federal Ministry for Economic Affairs & Energy said in a statement “The geopolitical developments and risks above all led to certain reluctance in placing orders.” The Ministry added that it expects to see “moderate” growth during the coming months.

Analysts had predicted that the crisis in the Middle East plus economic sanctions imposed on Russia over the Ukraine conflict would eventually harm German exports and GDP growth.

The Bundesbank, Germany’s central bank, had forecast stagnating GDP growth for Q2 2014, with industry especially shifting into “a low gear.”

Spooked by a report today that Italy is officially back in recession and a fresh buildup of Russian soldiers on the Ukrainian border, Eurozone stocks plunged and the euro hit its lowest level against the dollar in almost a year.

Eurozone Ifo Index down

The closely watched Ifo Index for the economic climate in the Eurozone has fallen to 118.9 points in this quarter from 123.0 in the previous three-month period.

The Ifo Institute, based in Munich, Germany, wrote:

“While assessments of the current economic situation remained unchanged at a low level, the six-month economic outlook deteriorated significantly. The experts surveyed fear rising energy prices and falling exports due to the Ukraine conflict.”

Ifo Index Eurozone

(Source: Ifo Institute)

In most Eurozone nations, the marginal improvements seen during the last quarter have now evaporated. The economic situation has deteriorated considerably in Estonia and Finland, two countries that do a great deal of business with Russia.

Austria, the Netherlands and Ireland were the only Eurozone countries to register a slightly better economic situation.

Ifo added “Although the six-month economic outlook for the euro area remains at a high level, it is less optimistic than the previous quarter.”

In May, industrial production in Germany fell by 1.8%.

The UK, which is reporting strong economic growth this year, is not a Eurozone member.