Weak Domestic Demand Drives Factory Orders Drop, But 'Core' Stable

German factory orders fell by 0.4% M/M in March, softer than the +0.4% expected and an even bigger downside miss when considering a downward revision in February (by 1.0pp to -0.8% - all figures are real, SWDA). The underlying 'core' measure pointed towards some stabilisation, however.

• Factory orders fell 1.9% Y/Y (vs -0.7% consensus) vs -8.8% in February, with the improvement in the annual comparison mainly due to base effects.
• Core (ex-large ticket items) orders, a better measure of underlying activity, increased by 0.1% in March (vs -0.6% prior); its less volatile 3M/3M measure printed weaker than before, though, at -2.3% (vs -0.9% prior).
• The breakdown showed the slight 'core' rise was driven by foreign orders (+2.0% M/M vs -1.8% prior, the fastest growth in 4 months), with similar growth in both the Eurozone and non-EZ regions). In contrast, domestic orders decreased by 2.5% (vs +1.0% prior).
• From a category-by-category perspective, core orders rose in all main groups except intermediate goods, with durable goods a notable area of strength (+2.4% M/M vs +3.5% prior after a very weak Jan/Dec).
• Real manufacturing turnover meanwhile declined 0.7% M/M in March (1.1% prior, downwardly revised 1.1pp), adding to evidence that data released Wednesday will show industrial production ended its recent 2-month in March (-0.7% cons vs +2.1% prior).
• Overall, even though core orders are stabilising, the data looks weak compared with other recent German economic prints and soft domestic orders continue to point to an export-led rather than domestic-demand fuelled recovery. Looking ahead, while the key surveys (PMI and IFO) both suggested that manufacturing activity improved in April, they also both remained in contractionary territory.

MNI, Destatis