German factory orders rose in February after a sharp drop at the start of the year – adding to hopes that the economy is bottoming out and that any possible recession might be mild and short-lived. 

Data released on Friday (Apr 5) showed a 0.2 per cent increase in demand from the previous month. That was worse than the median estimate of 0.7 per cent in a Bloomberg survey. The improvement was due to the machinery and equipment sector, as well as pharma and chemicals, the statistics agency said. 

A less volatile three-month reading showed a 2.8 per cent rise from the previous period, according to Destatis.

Germany was the only Group of Seven economy to shrink last year and is now flirting with a recession. The Bundesbank has warned that output could contract in the January-March period after already falling 0.3 per cent in the final three months of 2023.

Economists surveyed by Bloomberg also predict another contraction of 0.1 per cent in the first quarter.

The economic problems are largely down to the cutoff of Russian energy supplies, weak Asian demand for exports, problems among the country’s car manufacturers in adapting to the green transition and high interest rates.  

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But Bundesbank insists that a severe downturn isn’t likely and its President Joachim Nagel has repeatedly rejected the notion that Germany is again the “sick man” of Europe.

However, its weakness is being felt in the wider eurozone, whose 20-nation economy narrowly avoided a recession in the second half of 2023.

Recent data for the German economy was mixed. The ZEW expectations survey and the Ifo business climate index both improved more than anticipated in March. 

However, an index of factory activity from S&P Global unexpectedly declined further below the threshold signalling expansion. 

Institutes that advise the government recently lowered the forecast significantly. Output will rise just 0.1 per cent in 2024, compared with a previous forecast for 1.3 per cent expansion, they said. Growth is seen picking up to 1.4 per cent in 2025. BLOOMBERG