San Francisco Frontiers - German factory orders rise in February but energy shock looms

New orders, a key indicator of future business activity, rose 0.9 percent from a month earlier, according to preliminary figures from statistics agency Destatis, slightly below forecasts.

It followed a near 11-percent drop in January.

Despite some volatility, the indicator has generally been trending up since mid-2025 as the government increases public spending in a bid to revive Europe's struggling biggest economy.

But the latest figures concern the period immediately before the outbreak of the US-Israeli war against Iran, which has sent oil and gas prices surging, a huge burden for Germany's power-hungry manufacturers.

The positive momentum "is likely to be temporarily dampened as a result of the energy price shock associated with the conflict in the Middle East," the economy ministry said in a statement.

Overseas demand surged 4.7 percent in February while domestic orders dropped 4.4 percent, according to Destatis.

There was good news for the troubled auto sector, where orders rose 3.8 percent, and there were also strong increases in demand for metal products.

But there was a near 26-percent month-on-month decline in the category of transport equipment that includes military vehicles, aircraft, ships and trains.

Hopes for a recovery in Germany this year following several bleak years have been dampened due to the energy shock unleashed by the war.

Last week, leading economic institutes more than halved their growth forecast for this year, and now are predicting expansion of just 0.6 percent.

J.Scott--SFF