GERMAN DATA: Plummeting Euro Core Factory Orders Cast Doubt On Recovery

German factory orders rose 0.2% M/M in February on a price/seasonally/calendar adjusted basis, softer than the 0.7% expected and an even bigger downside miss vs consensus when considering a downward revision to January (by 0.1pp to -11.4%). This leaves factory orders more than 10% lower on a Y/Y working day adjusted basis, and while the headline number shows some stabilisation in the beleaguered industrial sector, the underlying trend in early 2024 remains to the downside.

• Core (ex-large ticket items) orders, a better measure of underlying activity, fell by 0.8% M/M after -3.0% in January - the 5th contraction in 6 months. The breakdown showed domestic core orders actually fairly robust at +1.5%, the biggest gain in 6 months (-2.3% prior). Instead it was foreign orders that dragged down the overall index, falling by 2.4% M/M after -3.6% in January. Eurozone orders led the drop, plummeting by 8.8% M/M, after -4.3% in January (foreign ex-Eurozone orders actually rose for the first time in 9 months).
• Outside of the early pandemic months of 2020, this was the biggest single-month fall in core Eurozone factory orders since at least 2010. Overall (non-core) new orders from the Eurozone fell 13.1% (after -24.3% in Jan), with total ex-euro up 7.8% and domestic up 1.5%.
• It's unclear what spurred this drop, particularly as eurozone-wide surveys suggest a nascent rebound in demand and industrial production in 1Q 2024. While the drop in overall orders is clearly linked to a pullback in capital goods orders after a surge in December on a one-off contract, the core decline will be concerning if not reversed in the months ahead.
• Manufacturing turnover rose 2.2% M/M, vs -5.2% in January - the latter of which reflects major revisions from -2.0% prior (autos and machinery/equipment saw large revisions). While there is no consensus for this figure, it could underpin expectations for continued growth in industrial production in Monday's release (currently +0.5% M/M expected vs +1.0% in Jan).
• Overall though there is no convincing sign of a turnaround in German factory activity, with the manufacturing PMI falling to a 5-month low in February and the March EC manufacturing confidence survey plumbing the lowest levels since the pandemic.

Source: Destatis, MNI