DE: Manufacturers' Orders

January 6, 2017 01:00 CST

Consensus Actual Previous Revised
Month over Month -2.4% -2.5% 4.9% 5.0%
Year over Year 3.3% 6.3% 6.4%

Much as expected, following their surprisingly strong (and minimally upwardly revised) surge in October, manufacturing orders lost ground in November. However, a 2.5 percent monthly drop reversed only half of the previous period's decline and left intact a respectable rising trend. Annual growth was 3.3 percent, down from 6.4 percent last time but still the second highest of the year to date.

November's monthly slide was wholly attributable to capital goods which posted a 4.8 percent slump, albeit after 7.3 percent leap last time. Basics were up a further 0.5 percent and consumer and durable goods 1.5 percent.

Regionally, weakness was roughly evenly spread between the domestic and overseas markets. The former saw demand contract 2.8 percent and the latter 2.3 percent. Orders from the rest of the Eurozone were down 2.7 percent, somewhat ahead of a 2.0 percent decrease for the rest of the world.

Despite November's setback, average total orders in October/November were still a healthy 3.7 percent above their third quarter mean and so should be indicative of a solid short-term outlook for industrial production. Fourth quarter real GDP growth probably remains on course for something in the 0.4 percent to 0.5 percent range.

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.