DE: Manufacturers' Orders

Thu Oct 06 01:00:00 CDT 2016

Consensus Actual Previous Revised
Month over Month -0.2% 1.0% 0.2% 0.3%
Year over Year 2.4% -0.7% -0.5%

The outlook for manufacturing output improved a little in August as orders posted a much stronger than expected 1.0 percent monthly bounce. The increase followed a marginally larger revised 0.3 percent gain in July and lifted annual growth from minus 0.5 percent to 2.4 percent, its best performance since March. This was only the second time since March/April 2015 that orders have achieved back-to-back monthly rises.

The pick-up versus July was broad-based with basics up 1.7 percent, consumer and durables 2.9 percent and capital goods 0.3 percent. It was also wholly attributable to the domestic market where orders increased 2.6 percent although this reversed only part of the previous period's 3.2 percent slump. By contrast, overseas demand dipped 0.2 percent after a 2.8 percent bounce within which orders from the rest of the Eurozone surged 4.1 percent, compounding a 5.6 percent spike last time. Orders from the rest of the world were down 2.8 percent.

Today's report leaves average orders in July/August 0.6 percent above their second quarter mean and August alone 1.0 percent higher than at the start of the year. What had been a flat trend may now be turning up although possible revisions to the August figures leave a question mark hanging over that. Still, as things currently stand, a decent month for demand in September should be enough to secure a respectable increase in industrial output through year-end.

Manufacturers' orders are a leading indicator for industrial production. The figures are calculated every month by the Federal Statistical Office and represent the value of all orders for the delivery of self-made products confirmed by industrial enterprises with 50 or more employees in the respective reporting period. The results are broken down by both sector and region of origin (domestic and foreign split into euro area and non-euro area). Monthly volatility can be very high so moving averages give a much better guide to underlying trends.

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.