German Factory Orders Rebound in May, Easing Recession Fears

German factory orders rebounded in May, rising 6.2% from a year earlier and comfortably exceeding forecasts, in a tentative signal that Europe's largest manufacturing sector may be stabilising after a stretch of volatile readings. The improvement follows sharp monthly swings earlier in the year, including a decline in April driven by weaker demand in the automotive, electrical-equipment and mechanical-engineering industries. Orders data are closely watched as a leading indicator of industrial activity in Germany, where manufacturers have struggled with soft external demand, high energy costs and intensifying competition, particularly from China. A firmer order book, if sustained, would support hopes for a gradual industrial recovery and feed into the broader euro-area outlook, which has been clouded by the economic fallout from the conflict in the Middle East and elevated energy prices. The European Central Bank raised interest rates in June and has flagged upside risks to inflation alongside downside risks to growth. Analysts caution that a single month of stronger orders, often influenced by large one-off contracts, does not by itself confirm a durable turnaround in demand.