Manufacturing orders collapsed in March. A 10.7 percent monthly slump was nearly five times steeper than the market consensus and easily obliterated February's smaller revised 4.5 percent gain. This was their worst performance since April 2020, just after the arrival of Covid and leaves orders at their lowest level since July 2020. The latest slide also slashed annual growth from minus 6.1 percent to minus 11.0 percent.

Domestic demand declined a monthly 6.8 percent after a 4.7 percent rise in February. This left overseas demand, which contracted fully 13.3 percent (Eurozone minus 10.8 percent), to account for a disproportionately large share of the headline drop. Overall orders were hit by a 14.1 percent decrease in capital goods led by a 47.7 percent nosedive in the construction of ships, railed vehicles, aircraft, spacecraft and army vehicles. Elsewhere, intermediates were down 7.5 percent but consumer goods increased 1.2 percent.

Despite March's setback, total new orders last quarter still edged up 0.2 percent versus the fourth quarter of 2022. Even so, the outlook for goods production has deteriorated significantly and previous hopes that the sector was on the turn now hang in the balance. To this end, the German ECDI (minus 24) and ECDI-P (minus 15) show that economic activity in general is also falling short of market expectations.

Orders in March are expected to fall 2.2 percent on the month after a very strong 4.8 percent jump in February.

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.