Phew! Lucky again? Will the German industry get through the corona crisis with a little black eye? The idea might come to mind if you look at the current order backlog in manufacturing in Germany. According to the latest figures from government statisticians (for the month of May), the order backlog in May 2020 was 2.7 percent lower than in February 2020. Seasonally and calendar-adjusted, the month before the beginning of the restrictions imposed by the corona pandemic in Germany. So everything is fine with such a small decline? The new orders index calculated in the following chart was 114.1 points in February and 111.0 points in May.
But wait. The chart shows something else entirely. The chart goes back to 2015. And here you can see that the peak in the industry order backlog in December 2018 was 120.5 index points. Since then, it has been going downhill continuously. We had already addressed the weakness and looming recession in the German economy on several occasions before the Corona crisis. But the recession in industry, which was already present before Corona, never really found its way into the media because domestic demand (construction and services) kept the GDP average in the green zone. But this chart shows well that a structural slump in German industry was already underway long before Corona.
Here are some more detailed statements of the Federal Statistical Office from today’s report:
The range of orders on hand has increased slightly and amounted to 6.0 months in May 2020 in the manufacturing sector (April 2020: 5.9 months). For manufacturers of intermediate goods, the range of the order backlog in May 2020 was 2.9 months as in the previous month. For manufacturers of capital goods it was 8.5 months (April 2020: 8.3 months) and for consumer goods 2.4 months (April 2020: 2.3 months).
Reach increased in May 2020, especially in the capital goods sector, because sales had recently fallen sharply. Moreover, there were no extensive order cancellations in the industrial companies sector in May 2020.
The reach indicates how many months the companies would theoretically have to produce without new orders in order to process existing orders, assuming sales remained constant. It is calculated as the quotient of the current order backlog and the average turnover of the last 12 months in the industry sector concerned.