Midday Brief – Factory Boost

The euro currency popped higher during the US session after German factory orders data surprised to the upside, pushing back fears of an imminent recession.

Factory orders in Germany rose by 6.4% month-over-month in May 2023, easily exceeding market estimates of 1.2% and following an upwardly revised 0.2% rise in April.

This was the largest increase in industrial orders since June 2020, boosted by a rise in large-scale orders. New orders for motor vehicles, trailers, and semi-trailers soared by 8.6%, and those for other transport equipment surged by 137.1%.

Additionally, orders grew for miscellaneous vehicle construction, which includes the construction of ships, railed vehicles, aircraft, spacecraft, and army vehicles.

In contrast, orders of electrical equipment tumbled by 15.0%. Excluding large-scale orders, new orders rose by 3.2%. While orders for capital goods increased by 12.0%, orders fell for both intermediate goods (-1.1%) and consumer goods (-0.8%).

Foreign orders climbed by 6.4% with demand up from both the Euro Area (6.5%) and third countries (6.2%), while domestic orders gained 6.2%, with demand driven from China.

Jobs cuts data from the US was also encouraging. US-based employers announced 40.709K job cuts in June 2023, the lowest level since October 2022, compared to 80.809K in May. Still, the reading is above 32.517K layoffs announced a year earlier. The tech sector laid off nearly 5,000 employees.

Andrew Challenger, senior vice president at Challenger, Gray & Christmas Inc said “The drop in cuts is not unusual for the summer months. In fact, June is historically the slowest month on average for announcements. It is also possible that the deep job losses predicted due to inflation and interest rates will not come to pass, particularly as the Fed holds rates.“

So far this year, employers have announced 458,209 cuts, the highest first-half total since 2020. Technology is leading with 141,516 cuts, the second-highest total for the sector ever, followed by retail companies (48,212) and financial firms (39,768).

The top reason for job cuts is Market/Economic Conditions, followed by Cost-Cutting and store, unit, or department Closings.