German Factory Orders Fall as Economy Faces Ukraine War Fallout

(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

German factory orders fell for the first time in four months in the runup to Russia's invasion of Ukraine, underscoring concerns over slower growth in Europe's largest economy. 

Demand declined 2.2% in February from the previous month, driven by a slump in foreign orders. That's worse than all but one prediction in a Bloomberg survey of economist, which saw a median estimate of a 0.3% drop. 

Expectations for Germany's economic recovery have been slashed after the war in Ukraine sent energy prices higher while disrupting supply chains that had already been suffering from pandemic-related snarls. 

A panel of advisers to Chancellor Olaf Scholz last week lowered its growth projection to 1.8% from 4.6% for this year, while warning that a recession is possible because of the country's high dependence on Russian energy. Inflation reached 7.6% in March -- the highest level since records began after reunification in the early 1990s. 

Companies including BMW AG, BASF SE and ThyssenKrupp AG have already warned that their earnings will slip. On Monday, Deutsche Bank AG Chief Executive Officer Christian Sewing said a recession “would presumably be inevitable” if Germany was cut off from deliveries of Russian oil and natural gas. 

Before the invasion, the economy had been grappling with the latest wave of the pandemic. Restrictions have now been loosened, though the caseload remains elevated and Health Minster Karl Lauterbach has urged citizens to remain cautious. 

©2022 Bloomberg L.P.