Having slumped a slightly shallower revised 11.3 percent on the month in July, manufacturing orders staged a partial recovery in August. A 3.9 percent monthly gain was stronger than expected and large enough to lift annual growth from minus 10.1 percent to minus 4.4 percent. That said, orders were still nearly 2 percent below their pre-Covid level in February 2020.

The monthly headline rise reflected a 4.0 percent gain in the domestic market and a 3.9 percent increase in overseas demand. A rebound in computer, electronic and optical products (37.9 percent) did much of the work. More generally, intermediates climbed 9.3 percent and consumer goods 8.8 percent while capital goods edged up just 0.1 percent.

The orders data remain particularly volatile and even 3-month on 3-month growth of 4.9 percent is misleadingly strong. In fact, absent any revisions, September will need an 8.0 percent monthly bounce just to keep the third quarter flat. The bottom line is that demand is soft, leaving a subdued outlook for industrial production over coming months. However, with the German RPI at 2 and the RPI-P at 5, overall economic activity is at least performing much as the forecasters predicted.

Orders have been particularly volatile, collapsing 11.7 percent on the month in July that followed a 7.6 percent gain in June. For August, forecasters are calling for a 2.1 percent increase.

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.