Manufacturing orders took off in December. An 8.9 percent monthly spurt was much stronger than the market consensus and the largest increase since June 2020. November's modest gain was revised away but the year-end leap was large enough to boost annual growth from minus 4.6 percent to 2.1 percent. Orders now stand at their highest level since last June. However, note that the latest spike was driven by so-called major orders, in particular for transport machinery which was up fully 110.9 percent versus the previous month. Excluding this category orders fell 2.2 percent.

Both the domestic and overseas markets posted rapid monthly rates of expansion. The former grew fully 9.4 percent, its fastest pace since December 2021, while the latter increased 8.5 percent (Eurozone 34.5 percent), a 6-month high. Total new orders for capital goods climbed 10.9 percent and intermediates were up 8.3 percent but consumer goods dropped 1.3 percent.

Orders data are notoriously volatile and December's hefty advance should be treated with caution. Indeed, even after the year-end report, quarterly growth was only 0.1 percent. It may be that manufacturing conditions are beginning to turn but at least a partial reversal in demand in January would not come as a surprise. On most other measures, the sector began 2024 firmly in the doldrums. Still, today's report lifts the German RPI to minus 4 and the RPI-P to 13, the latter's best reading since early January and indicative of overall real economic activity running a little ahead of market expectations.

Manufacturing orders are expected to decrease 0.1 percent on the month in December versus November's disappointing 0.3 percent rise that followed a 3.8 percent slump in October.

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.