German factory orders drop in new blow to economy

German industrial orders unexpectedly fell in July, official data showed Friday, the latest sign that Europe's long-struggling top economy remains stuck in the doldrums.

New orders, closely watched as an indicator of future business activity, dropped 2.9 percent month-on-month, according to preliminary figures from federal statistics agency Destatis, after declining 0.2 percent in June.

The July figure was pulled down by a decrease in transport equipment orders, and came despite expectations for a slight rebound.

Economy Minister Katherina Reiche, a member of the coalition government that took power in May vowing to boost the eurozone's traditional growth engine, stressed that orders had dropped for three straight months.

"We do not need any further warning signals to realise that we must now act decisively and consistently to gear all our policies towards competitiveness," she said in a statement. 

"It's about jobs and the preserving of production sites."

Germany has been stuck in a long downturn as its manufacturers face high energy costs and weak demand for their key products. 

US President Donald Trump's tariff blitz is also weighing heavily on the export powerhouse.

The July figure was hit by a near 40 percent fall for orders of transport equipment such as aircraft, ships and trains. 

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There was also a heavy drop for electrical equipment orders.

But there were increases for the country's troubled auto sector as well as pharmaceuticals and clothing, Destatis said.  

Both domestic and foreign orders fell, with orders from the euro area down a hefty 3.8 percent. 

"The figures underscore that, after an initially hopeful spring, the economy has shifted back into reverse," said LBBW bank economist Jens-Oliver Niklasch.

"At the moment, there is a lack of imagination as to where... a longer-lasting economic upturn in Germany is to come from."

Chancellor Friedrich Merz has made reviving the economy a priority and positive indicators in early 2025 had raised hopes of a rebound.

But more recent data have poured cold water on these expectations. Leading economic institutes this week downgraded their forecasts for this year, predicting only meagre growth.

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