The manufacturing sector saw new orders in August decline by a much steeper than expected 5.8 percent on the month and by 4.0 percent on an annual basis. The monthly decrease followed a revised increase of 3.9 percent in July, which had been supplemented by substantial orders for transport equipment, such as military vehicles, ships, and aircraft. The fall in August is more modest at 3.4 percent when these large-scale orders are excluded.

Capital goods posted the most significant decline, with a drop of fully 8.6 percent. Intermediate goods were down 2.2 percent and consumer goods 0.9 percent. Domestic orders slumped 10.9 percent and the overall slide would have been sharper but for foreign demand which, outside the euro area, increased 3.4 percent.

Turnover in August increased 3.2 percent but only due to a further drop in backlogs. This update leaves the RPI and RPI-P at minus 1 and 8 respectively, showing overall economic activity moving broadly in line with market expectations.

Manufacturing orders are expected to decrease a monthly 2.0 percent versus July's 2.9 percent monthly 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.