German factory orders stall in May due to Brexit uncertainty

German factory orders ground to a halt in May as uncertainty around Brexit and the impact which it might have on the European single currency weighed on orders from outside the euro area, according to economists.

Orders were flat month-on-month following a 1.9% drop in April and against economists´' expectations for an increase of 1.0%.

Economists at Barclays attributed the weakness to the uncertainty surrounding the vote on continued membership of the European Union and the impact which it might have on the single currency.

That came against a backdrop of economic activity in emerging markets which was still slowing or shrinking due to weakness in commodity prices, Barclays said.

Non-euro area orders for durable consumer goods were the main victim, registering a drop of 24.1% mponth-on-month, sending total orders for that category 11.9% lower over the month.

Nonetheless, in April they had jumped by 29.6%, Barclays Research´s Olga Tschekassin and Tomasz Wieladek pointed out.

Total export orders on the other hand rose by 1.4% month-on-month, thank to stronger demand out of the single currency area itself, which rose by a strong 4.0% month-on-month.

Domestic German orders fell by 1.9% month-on-month, more than cancelling out a rise of 1.6% in April, as domestic intermediate goods orders sank by 6.2% over the month.

Overall, total intermediate goods orders decreased by 2.9% in comparison to April while those for capital goods increased by 1.9%.

"Today’s reading suggests that uncertainty arising from the UK’s referendum, even prior to the actual vote, likely slowed down factory orders in Germany," Barclays said.

Tschekassin and Wieladek had penciled in a slowdown in German GDP growth to a 0.2% quarter-on-quarter pace for the three months to the end of September.