Having surged a revised 7.6 percent on the month in June, manufacturing orders collapsed in July. An 11.7 percent drop was nearly three times the market consensus and the sharpest since the Covid-induced 27.3 percent nosedive back in April 2020. Annual growth dropped from 3.3 percent to minus 10.5 percent and orders now stand at their lowest level since April.

The monthly headline decline reflected hefty contractions in both domestic and overseas demand. The former fell 9.7 percent to its lowest level since May 2020 while the latter was down 12.9 percent. Much of the overall fall was due a very large order in the other transport equipment category which dropped some 54.5 percent following a 72.4 percent bounce in June. More generally, capital goods decreased 15.9 percent, intermediates 4.5 percent and consumer goods 8.2 percent.

Recent orders data have been particularly volatile and, despite the July slump, 3-monthly growth is still positive at 3.1 percent. Even so, business surveys suggest that manufacturing remains weak and likely to be a drag on third quarter GDP growth. Today's update puts the German ECDI at minus 18 and the ECDI-P at minus 29, both gauges showing forecasters also continuing to overestimate overall economic activity.

Orders have jumped 7.0 and 6.2 percent on the month in the last two reports but are not expected to extend the gain to July where forecasters are calling for a 4.0 percent decline.

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.