The manufacturing sector exhibited a mixed performance in October. New orders fell by 1.5 percent month-over-month, 0.5 percentage points less than expected and that after a sizeable upward revision to September's advance. The drop was largely driven by declines in machinery (minus 7.6 percent) and automotive (minus 3.7 percent) manufacturing. Annual growth was boosted by positive base effects which led to sizeable gains in basic metals (10.2 percent) and electronics (8.0 percent).

However, the regional picture was disappointing with domestic orders falling a sharp 5.3 percent, leaving a cumulative loss of fully 11.4 percent since July. By contrast, foreign orders rose 0.8 percent, compounding a 9.3 percent spurt in September. This reflected a particularly strong contribution from outside the euro area (6.3 percent).

Turnover data painted a subdued picture, declining 1.2 percent month-over-month and 3.9 percent year-over-year, reflecting weaker demand in some capital goods industries (minus 3.6 percent). Meanwhile, intermediate goods (0.9 percent) and consumer goods (4.2 percent) sectors offered bright spots, showcasing diversification in demand patterns. These trends highlight the manufacturing sector's vulnerability to external shocks and dependence on large contracts for overall growth.

The latest update lifts the German RPI to minus 22 and the RPI-P to minus 13. This means that economic activity in general is still lagging market expectations.

Orders are seen falling back by 2.0 percent after rising 4.2 percent a month ago.

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.