Germany's manufacturing sector reflected both cyclical weakness and sectoral divergence. New manufacturing orders fell by 0.8 percent compared with July, following a sharp 2.7 percent decline in the previous month. However, orders were 1.6 percent higher than in August 2024, suggesting some resilience amid subdued short-term momentum. Excluding large-scale orders, the fall deepened to 3.3 percent, highlighting reduced industrial demand across core sectors.

The decline was mainly driven by sharp contractions in the automotive industry (minus 6.4 percent), computer and electronic products (minus 11.5 percent), and pharmaceuticals (minus 13.5 percent), indicating persistent challenges in export-dependent and high-tech segments. In contrast, strong rebounds in fabricated metal products (15.4 percent), other transport equipment (17.1 percent), and electrical equipment (7.2 percent) offered partial relief.

Domestic demand rose by 4.7 percent, while foreign orders fell by 4.1 percent, reflecting weaker external demand from both euro area (minus 2.9 percent) and non-euro markets (minus 5.0 percent). Turnover mirrored the downturn, dropping 0.8 percent month-over-month and 1.1 percent year-over-year. Overall, the latest update point to a fragile recovery path for German manufacturing, weighed by external headwinds and sectoral imbalances, though resilient domestic activity offers cautious optimism for stabilisation ahead. This latest update takes the RPI to 4 and the RPI-P to 1, meaning that economic activities continue to perform within the expectations of the German economy.

Orders are seen rebounding by 1.3 percent on the month in August after a big 2.9 percent drop on the month in July. On year, the consensus sees sales up 3.0 percent after dropping 3.5 percent on year in July.

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.