Manufacturing orders rebounded sharply in May. A 6.4 percent monthly jumped followed a revised 0.2 percent gain in April and easily beat the market consensus. However, having slumped fully 10.9 percent in March, May's level was still 5.1 percent below its February mark and 1.1 percent short of its pre-Covid print. Annual growth was minus 4.1 percent, up from minus 9.4 percent.

Domestic demand rose a monthly 6.4 percent while the overseas market expanded 6.5 percent (Eurozone 6.2 percent). The overall advance was dominated by capital goods which climbed fully 12.0 percent and more than offset declines in both intermediates (1.1 percent) and consumer goods (0.8 percent). Especially robust were motor vehicles, trailers, and semi-trailers (8.6 percent) as well as other transport equipment (137.1 percent), which includes ships, railway rolling stock, air and spacecraft, and military vehicles.

May's sharp, but only partial recovery, puts average total new orders so far this quarter 3.0 percent below their mean level in the first quarter and so still leaves a problematic outlook for industrial production. More generally, it lifts the German ECDI to minus 4 and the ECDI-P to minus 13. Both measures now indicate only a limited degree of economic underperformance versus market expectations.

Orders are expected to rise 2.0 percent in May which would compare with an unexpected 0.4 decrease in April that followed a 10.0 percent plunge in March.

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.