Having surged in December on the back of a jump in the so-called major category, manufacturing orders slumped at the start of the year as the same category suffered an inevitable reversal. An 11.3 percent drop in total orders was nearly double the market consensus, the steepest since April 2020 and more than fully reversed the previous period's even stronger revised 12.0 percent jump. Annual growth dropped from 5.6 percent to minus 6.2 percent.

Both the domestic and overseas markets posted sizeable monthly declines. The former was down 11.2 percent and the latter 11.4 percent within which orders from the Eurozone fell 25.7 percent. New orders for capital goods decreased 13.1 percent, intermediates 9.3 percent and consumer goods 5.7 percent.

The heightened volatility in the monthly data leaves a still soft picture of demand for manufactured goods. Indeed, January's level was 4.3 percent below the fourth quarter average and the lowest since the middle of 2020. Prospects for industrial production near-term remain poor. Today's report trims the German RPI to minus 7 and the RPI-P to exactly zero. In other words, overall economic activity is running much as expected.

Manufacturing orders are expected to fall a monthly 6.0 percent in January versus December's unexpected 8.9 percent surge tied to major orders for transport machinery. Annual contraction is seen at 3.6 percent versus December expansion of 2.1 percent.

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.