By Geoffrey Smith

Investing.com -- New orders to German manufacturers rose for the first time in four months in May, breaking a losing streak that had begun immediately after Russia's invasion of Ukraine.

Statistics office Destatis said orders edged up 0.1% from April, while it also revised up April's numbers to show a decline of only 1.8% from an initial estimate of 2.7%. The number, which is an important leading indicator for the Eurozone economy, is consistent with a modest rise in Ifo's business confidence index for the month, but predates the 60% reduction in gas supplies from Russia which has made life even more difficult for the manufacturing sector.

However, orders were still down 3.1% from a year earlier in calendar-adjusted terms, and the underlying trend was arguably weaker than the headline number suggested. Excluding volatile contributions from big-ticket items, orders fell by another 0.9% on the month. Moreover, the headline increase was due entirely to a pickup in orders from outside the Eurozone, which rose 3.7%. Orders from the Eurozone fell 2.4% and domestic orders fell 1.5%.

Destatis also warned that industrial sales were running below orders, as companies continued to struggle to fill orders due to supply chain constraints such as the closure of Chinese ports due to COVID-19 lockdowns.

As such, the numbers do little to dispel the fears of looming recession that hit German and Eurozone stocks and sent bond yields tumbling on Tuesday.

Holger Schmieding, chief economist with Berenberg Bank in Berlin, said in a note to clients on Wednesday that he expects the Eurozone economy to go into recession from the autumn until the middle of 2023, due to the spike in natural gas prices and the likelihood of gas rationing over the winter.

"At a normal consumption rate for the next 12 months, the additional gas bill implied by the new futures prices relative to those of early June adds up to 220 billion euros, equivalent to 1.5% of EU GDP in 2021 and 3% of private consumption," Schmieding said.

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