EUROPEAN DATA WRAP: Soft German industrial orders skewed by large-scale activity though the nation supported EZ retail sales

Analysis details (15:00)

German Industrial Orders, Oct

• M/M -3.7% vs. Exp. 0.2% (Prev. 0.2%)


• Another bleak read on the bloc’s largest economy that is even more dire if the less-volatile 3M/3M compare of -4.6% is used. However, September’s release was subject to a modest upward revision. Looking into the October data in more detail, when large-scale orders are excluded industrial orders actually printed higher by 0.7% M/M. For Germany specifically, domestic orders actually increased by 2.4% while foreign orders declined by 7.6%. Overall, pressure in the German economy is no surprise at this point though the scale of the fall is possibly overstated given the clear influence of large-scale orders, which are historically very volatile.


• A release which spurred a very modest bid in Bunds, which eventually grinded higher to a 135.18 session peak. Thereafter, EGBs moved in-line with the softer performance of Gilts/USTs.

EZ Retail Sales, Oct

• M/M 0.1% vs. Exp. 0.2% (Prev. -0.3%, Rev. -0.1%); Y/Y (Oct) -1.2% vs. Exp. -1.1% (Prev. -2.9%)


• The breakdown of sales volume shows the MM upside was driven by non-food products, though it seemingly came in shy of consensus due to pressure within automotive fuels (-0.8%) and food, drinks & tobacco (-1.1%). Pressure in automotive fuel occurred during a period of upside in European energy benchmarks (TTF) and as the pullback in pump prices among a selection of member nations slowed at levels above the approximate YTD average. The state breakdown is noteworthy both in terms of those who observed a decrease, with France (-1.0%) and Spain (-0.4%) the standout of those who have reported thus far. While Germany (+1.1%) and the Netherlands (+2.4%) drove the M/M strength.


• Overall, the data does not add much that was not already known via much more timely PMI data and given the trajectory of that data recently and ongoing recession concerns out of key economies and the bloc as a whole, with the European household evidently pressured. Ahead, we look for any evidence of further pressure in the EZ which may have influence on current markedly dovish rate expectations and by extension on when exactly the ECB elects to pull the trigger on a cut. Currently, a 25bp reduction is essentially priced for March’24 with ~150bp of total easing implied over the year.


• The release did not spark any significant or sustained market reaction in the EUR or EGBs.

06 Dec 2023 - 15:00- Fixed IncomeData- Source: Newsquawk