DE: Manufacturers' Orders

Thu Jun 07 01:00:00 CDT 2018

Consensus Actual Previous Revised
Month over Month 0.5% -2.5% -0.9% -1.1%
Year over Year 0.0% 3.2% 3.0%

Manufacturers saw a further, unexpected, contraction in new business in April. A 2.5 percent monthly drop followed a slightly steeper revised 1.1 percent fall in March and means that orders have now declined for four months in a row. Annual growth was 0.0 percent, down from 3.0 percent last time and the first non-positive print since July 2016.

The latest monthly headline fall was driven by capital goods which slumped some 5.6 percent but consumer goods were also off a sizeable 2.2 percent. By contrast, basic goods rose 2.5 percent.

Regionally the breakdown was hardly reassuring as the overall decrease would have been much sharper but for a relatively small 0.8 percent slide in overseas demand (Eurozone minus 9.9 percent, rest of the world up 5.4 percent). Hence, the domestic market contracted a hefty 4.8 percent, easily more than reversing March's 1.5 percent gain and its third negative print this year.

Overall orders were 3.3 percent below their average level in the first quarter when they dropped 2.2 percent versus October-December. In fact, the current level is the lowest since July last year and within this, the domestic component is the weakest since January 2017. Accordingly, today's report is consistent with the May manufacturing PMI which pointed to a further cooling in the sector's business activity over coming months. First quarter industrial production was only flat; the early signs are that the current period will not be much better.

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.