AI helps drive sharp rise in German electrical industry orders

Germany's electrical and digital industry recorded a sharp rise in orders in August, helped by growing demand linked to artificial intelligence (AI).

Incoming orders rose 17% in August, stronger than the average increase in the first seven months of the year, Andreas Gontermann, chief economist at the German Electro and Digital Industry Association (ZVEI), told the Augsburger Allgemeine newspaper in remarks published on Wednesday.

In the first half of the year, orders had risen 9.5% year-on-year.

Gontermann said the growth was partly driven by AI. "With a data centre, almost all components apart from the building shell come from our industry," he said.

Ifo Institute researcher Klaus Wohlrabe also sees a positive outlook for the sector, which employs around 865,000 people in Germany.

"Companies recorded significantly more new orders and, for the first time in quite a while, are satisfied with their order books again," Wohlrabe said.

He pointed to digitalization, automation, the expansion of data centres and AI infrastructure, as well as defence orders. Export expectations in the sector also improved.

Exports by the electrical industry rose 9.7% to €162.9 billion ($183 billion) between January and July compared with the same period last year, according to the industry association.

Wohlrabe said the positive trends would take longer to feed through to the labour market, with the improved order situation likely to initially halt job cuts and reduced working hours before new hiring begins.