GERMAN DATA: August Factory Orders Weak, Driven By Foreign Sector
August manufacturing orders (-0.8% M/M vs 1.2% consensus) were driven by weak developments in the foreign sector which more than outweighed some recovery in domestic orders. A minor July revision (now -2.7% from -2.9% unrevised) does not move the needle.
- "When large-scale orders are excluded, new orders were 3.3% lower than in the previous month. The less volatile three-month on three-month comparison showed that new orders in the period from June 2025 to August 2025 were 2.3% lower than in the previous three months; when large-scale orders are excluded, new orders were down 2.0%.", Destatis comments.
- On headline drivers: "The negative development of new orders in manufacturing in August 2025 was primarily attributable to the substantial decline in new orders in the automotive industry (-6.4% on the previous month after seasonal and calendar adjustment). In addition, the declines witnessed in the manufacture of computer, electronic and optical products (-11.5%) and in the pharmaceutical industry (-13.5%) negatively impacted the overall result"
- Recent declines in headline German factory orders highlight the exposure of the series to the foreign sector, which had been strong until May but since then has deteriorated notably (see chart below). On an index level, the 'core' factory orders series stands only marginally above cycle lows in August.
- Manufacturing turnover data meanwhile (released with the orders series) sends a weak signal for tomorrow's IP (consensus is for -1.0% M/M in IP, so that is already pessimistic).
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
LOOK AHEAD: US Macro: PPI (Wed) and CPI (Thu) Inflation
US PPI inflation is released on Wednesday before CPI inflation on Thursday, an unusual ordering that should see core PCE implications dialled in after the CPI release rather than the usual wide range waiting for specific PPI details. PPI will be watched more closely than usual this month after a far stronger than expected jump in last month’s July report fired a warning short over tariff-based cost pressures starting to feed through. That included a 0.6% M/M increase in our preferred core series of PPI ex food, energy & trade services, which strips out items such as the then booming portfolio management & investment advice category following the strength in equity markets. It's too early to gauge an accurate sense of analyst expectations for August.
CPI inflation on Thursday will then be the last major release ahead of the Sep 17 FOMC decision. Consensus looks for core CPI at 0.3% M/M after the 0.32% M/M in July, another monthly increase comfortably above a pace consistent with 2% inflation. August should in theory start to see the largest tariff impacts along with September and possibly October. Returning to July’s report, core goods inflation was softer than expected, at a still solid (by core goods standards) 0.2% M/M for a second month running but about half that of 0.4% expected by analysts. Instead, non-housing core services surprised higher. The latter was a “dangerous” development in the words of a usually dovish Chicago Fed’s Goolsbee (’25 voter), who speaking after Friday’s payrolls report is still undecided on a September cut whilst looking for August inflation data “to get more information”.
LOOK AHEAD: US Macro: Payrolls Preliminary Benchmark Revisions (Tue)
- The BLS on Tuesday will publish preliminary estimates of benchmark revisions, based off QCEW data for Q1.
- These will give an indication of the actual benchmark revisions on the Mar 2025 level of payrolls due with the Jan 2026 payrolls report released in early February.
- Bear in mind that the final benchmark estimate tends to nearly always be more negative than the preliminary figure – see historical values to the right.
- That doesn’t mean they can’t be large again after last year’s historically negative revision that lowered the level of payrolls by ~600k. Initial estimates we’ve seen look for another large downward revision, with the smallest being worth -550k but with wide ranges higher.
FED: Barclays Adds A Cut To 2025 Fed View
Barclays analysts now expect three Fed cuts in the remainder of the year, adding October to their pre-existing call for 25bp reductions in September and December. "Given the disappointing August employment report, we expect the FOMC to see more elevated downside risks to the employment side of the mandate."
- As for a 50bp September cut, "we think that the FOMC will view [that] as sending too strong a signal that labor market conditions are deteriorating. Indeed, we think that participants such as Powell understand that the slower pace of payroll employment reflects at least, in part, slower labor supply, which does not translate into increased labor market slack."
- For 2026 they continue to expect 25bp cuts in March and June to 3.00-3.25%, but "we do not think the FOMC will be able to cut rates more than twice next year, as we think that activity will show some slight acceleration, with the economy adapting to the new tariff environment and fiscal policy providing some support, and the unemployment rate will revert down amid limited increase in labor supply."
