Having risen sharply in December, manufacturing orders unexpectedly made further ground at the start of the year. A 1.0 percent monthly rise followed an upwardly revised 3.4 percent bounce and made for the first back-to-back gain since December 2021/January 2022. Even so, orders still stand at just a 3-month high and, with base effects negative, fully 11.0 percent below their level a year ago.

As it is, overall strength in January was concentrated in the overseas market where demand increased fully 5.5 percent (although Eurozone minus 2.9 percent) after a 2.0 percent advance at year-end. Domestic orders contracted 5.3 percent, reversing all of their December rise and are now at their weakest level since August 2020. Aggregate new orders for intermediates slumped 8.9 percent and consumer goods 5.5 percent but declines here were more than offset by an 8.9 percent jump in capital goods, within which aircraft and spacecraft construction (138.5 percent) were especially strong.

Consequently, today's report is something of a mixed bag. At best it suggests that the worst of the downswing for German manufacturing is over but the weakness of the home market clearly remains a major issue. Still, with both the German ECDI (8) and ECDI-P (4) just in positive surprise, overall economic activity is at least performing marginally better than expected.

Orders in January are expected to fall 0.6 percent after rising 3.2 percent December that, nevertheless, left orders down 9.6 percent on the year.

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.