DE: Manufacturers' Orders

Thu Nov 05 01:00:00 CST 2015

Consensus Actual Previous
Month over Month 0.9% -1.7% -1.8%
Year over Year 1.5% -0.9% 2.2%

Manufacturing orders were much weaker than expected in September. A 1.7 percent monthly drop followed an unrevised 1.8 percent decline in August and means that new business has declined fully 5.6 percent since June. Annual seasonally and workday adjusted growth was minus 0.9 percent, down from 2.2 percent last time and the second worst outturn since February.

September's disappointing headline was largely attributable to a second successive 2.9 percent monthly decrease in capital goods orders. However, consumer and durable goods also followed August's 0.9 percent fall with a further 0.4 percent drop and the overall picture would have looked worse still but for a modest 0.4 percent rise in basics.

The geographical breakdown showed that overseas demand (minus 2.4 percent) did most of the damage but the domestic component (minus 0.6 percent) was still down for the fifth time in the last six months and now stands 4.4 percent below its March peak.

The slide in orders flies in the face of the much more positive findings of the PMI surveys but, taken at face value, suggests that manufacturing output will struggle through year-end. It already seemed that near-term economic growth would be largely dependent on the services sector but today's data would suggest that the imbalance is even greater than previously thought.

Just last month the four leading economic institutes revised down their 2015 growth forecast (from 2.1 percent to 1.8 percent) and this latest update on goods orders warns that there could be a further downgrade to come. The likelihood of another ECB ease in December just got a little higher.

Manufacturers' orders measure new orders placed for manufactured goods, both domestic and foreign.

Manufacturers' orders data are keenly awaited by analysts each month. The data present a detailed breakdown by various sectors and a reading of the pulse of a major sector of the economy. Like the PPI, manufacturing orders data exclude construction, which is the preferred Eurostat measure.

The manufacturers' orders data rank among the most important early indicators for monitoring and analyzing German economic wellbeing. Because these data are available for both foreign and domestic orders they are a good indication of the relative strength of the domestic and export economies. The results are compiled each month in the form of value indexes to measure the nominal development of demand and in the form of volume indexes to illustrate the price-adjusted development of demand. Unlike in the U.S., orders data are not collected for all manufacturing classifications - but only those parts in which the make-to-order production plays a prominent role. Not included are, for example, mining, quarrying and the food industry.