New orders at German factories increased in January for the second month in a row boosted by the more-volatile component of aircraft orders, but the outlook for the country’s manufacturing sector remains clouded by rapidly rising interest rates.
Manufacturing orders rose 1% in January compared with the previous month, according to price-adjusted data from the German statistics office Destatis published Tuesday, beating the 1% drop expected by economists in a poll from The Wall Street Journal.
In December, orders rose by a revised 3.4% from a 3.2% increase previously estimated.
January’s increase in orders was driven by foreign orders, which rose 5.5% on month. Among these, orders from the eurozone fell 2.9%, and orders from the rest of the world rose by a sharp 11.2%.
The increase in orders from non-euro area countries was mainly due to large-scale orders in the sector of aircraft and spacecraft construction, Destatis said. The sector saw a 138.5% increase in orders on month, it said.
Meanwhile, domestic orders declined 5.3% on month.
Activity in Germany’s key manufacturing sector slowed throughout 2022 as high energy prices and weakening demand have hit production. Stabilizing energy prices and easing supply-chain bottlenecks should support output, but the drag of higher interest rates is likely to intensify and weigh on the sector, economists say.
Data from a purchasing managers survey showed new orders at German factories continued to fall across all main industrial groups in February, though especially sharply in the intermediate goods category amid reports of businesses looking to run down stocks of inputs.
Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com
