German Industry Order Backlog Reaches Record High in Over Ten Years

The high volume of orders not yet processed gives companies a certain degree of planning security in the short term. Economists see the development as an indication that industry can keep its capacities utilised over several quarters. This could pave the way for a growth quarter, provided framework conditions do not deteriorate further.

Voices from Economic Research

From the ranks of economic research, cautiously positive signals are emerging. The Centre for European Economic Research (ZEW) regularly observes sentiment in the financial markets and economic expectations. The Munich ifo Institute also provides important insights into the situation of companies with its business climate index. Both institutes had pointed in recent months to a gradual recovery in the industrial economy.

The banking sector is also observing the development closely. The Federal Association of German Volks- and Raiffeisenbanks (BVR) sees the high order backlog as an indication of a robust order situation, particularly among medium-sized companies. The cooperative banking group also stresses that financing conditions for investments remain decisive in order to be able to process the backlog in the future.

International Sales Markets in Focus

Internationally, German industry is in demand above all in Asia and North America. While Japan is considered an important trading partner, the USA remains a key sales market for capital goods. The geopolitical situation – for example, possible tensions in the Strait of Hormuz – could, however, further increase energy and logistics costs and thus slow the drawdown of the order backlog.

Outlook: Working Through the Backlog as a Litmus Test

For the coming months, observers expect companies to gradually work through the record backlog. The prerequisites for this are stable supply chains and a decline in energy prices. Destatis will publish the next data on the order situation in late summer. If the backlog continues to grow, this would support the thesis of a consolidating industrial recovery.

At the same time, economists warn against premature euphoria. The orders partly reflect catch-up effects from earlier quarters in which supply chains were disrupted. Only once industry can work through the backlogs without major disruption can the current peak be interpreted as a sustainable trend.