DE: Manufacturers' Orders

Thu Mar 08 01:00:00 CST 2018

Consensus Actual Previous Revised
Month over Month -1.6% -3.9% 3.8% 3.0%
Year over Year 8.3% 6.8% 7.2%

Manufacturing orders were very weak in January. A 3.9 percent monthly drop was more than twice market expectations and easily wiped out a smaller revised 3.0 percent bounce in December. Annual growth actually accelerated from 7.2 percent to 8.3 percent but this was simply due to an even steeper monthly decline (4.8 percent) a year ago.

January's monthly slide reflected a 3.3 percent drop in basics and a 5.0 percent slump in capital goods, only partially offset by a 2.4 percent increase in consumer and durable goods. There were also sizeable reversals in both domestic and overseas demand. The former was down 2.8 percent on the month, its first fall since last July, while the latter was off a sharper 4.6 percent, within which orders from the rest of the Eurozone declined 3.8 percent.

Today's report leaves the level of total orders at the start of the year some 2.0 percent below its average in the fourth quarter which saw a 3.5 percent increase versus July-September. However, after recent rapid growth some slowdown was probably inevitable and the monthly data are anyway very erratic. Still, without a rebound in February the outlook for German manufacturing would not appear quite as bullish as many currently expect.

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.