German Factory Orders Rebound Unexpectedly in May Despite Geopolitical Uncertainty

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BERLIN: German industrial orders unexpectedly returned to growth in May, official data showed on Monday, offering a boost to Europe's largest economy despite continued concerns over geopolitical tensions and high energy costs.

New factory orders rose 1.9 per cent from April, according to preliminary figures released by Germany's statistics agency Destatis. The increase defied analysts' expectations of a one per cent decline and followed a sharp drop in the previous month.

Germany's Economy Ministry said the figures suggested manufacturing orders had resumed the upward trend seen since the second half of 2025. However, it cautioned that conditions remain volatile, with uncertainty linked to the Middle East conflict continuing to weigh on business confidence until peace talks between the United States and Iran are concluded.

The recent US-Israel conflict with Iran drove up global energy prices, adding pressure on German manufacturers already struggling with weak demand and intense international competition. Energy costs have eased since Washington and Tehran reached a preliminary agreement to end the conflict.

The rebound in May was largely driven by an 85 per cent surge in transport equipment orders, a category that includes military vehicles, aircraft, ships and trains. The increase comes as Germany accelerates efforts to strengthen its armed forces.

Foreign orders rose 2.2 per cent during the month, while domestic orders increased 1.3 per cent.

ING economist Carsten Brzeski said some German manufacturers may have benefited from orders shifting to Europe, as Asian competitors were more heavily affected by disruptions around the Strait of Hormuz during the conflict.

Despite the stronger-than-expected figures, Brzeski warned that German manufacturers' order books are still recovering only gradually.