German manufacturing orders and industrial sales in May beat expectations

Overview

This report comments on German manufacturing orders and industrial turnover data for May. Goldman Sachs views the released data as broadly solid: the order side rebounded in line with expectations and the sales side, while below the initial estimate, still showed meaningful growth. The improvement was relatively broad-based across sectors, supporting the view that German industrial activity improved in the second quarter.

Core views

The central view is that forward-looking indicators in German manufacturing are stabilizing and spot activity was relatively strong in the second quarter. Euro area demand is the main support for the rebound in orders and sales, while domestic demand remains relatively lagging; industrial turnover was above Goldman Sachs' previous forecast, so the bank expects May industrial production announced later to show a 0.5% month-on-month increase, above market consensus.

Analysis framework

The report evaluates German manufacturing orders and industrial turnover using month-on-month, three-month-over-three-month, sector diffusion, and destination split metrics, and uses the relationship among orders, sales, and industrial production to assess near-term manufacturing output momentum.

Methodology notes

• Macroeconomic data trackingMoM and three-month-over-three-month comparison

  Track both single-month changes and smoother three-month trends to distinguish short-term noise from trend improvement.

  The report notes that May orders rose 1.9% month-on-month, but were still down 0.3% on a three-month-over-three-month basis; after excluding large orders, the three-month-over-three-month measure rose 4.1%, showing that trend interpretation needs to account for volatility.

• Sector diffusion analysisOrder and sales diffusion index

  Track the weighted share of sectors with growth to judge whether the recovery is concentrated in only a few sectors.

  The report says that in May, 66% of sectors had rising industrial turnover month-on-month on a weighted basis, and the three-month metric was also 66%, indicating relatively broad-based sales expansion.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• German macroeconomic conditions

  May manufacturing orders and industrial turnover directly reflect short-term industrial activity.

  Strengths

  Orders rebounded above expectations and industrial turnover reached its highest level since February 2024.

  Weaknesses

  The three-month measure for orders was still slightly negative, and domestic demand remains relatively weak, impacted by base effects and fluctuations in defense-related orders.

  Comparison

  Euro area demand is stronger, while domestic demand is relatively lagging.

  Risks

  If subsequent industrial production or GDP tracking data fail to confirm sales-side improvement, the macro improvement signal may weaken.

• Euro area demand

  Euro area orders and sales are an important external demand source for the recovery in German manufacturing.

  Strengths

  The report says the euro area market saw strong growth in orders and sales, stronger than the weak rebound in April.

  Weaknesses

  Non-euro area orders are somewhat weaker, while domestic orders were only stable.

  Comparison

  Euro area demand leads domestic demand.

  Risks

  If euro area demand eases, the recovery momentum in German manufacturing could come under pressure.

• German manufacturing and industrial production

  Improved industrial turnover is used to infer that German manufacturing industrial production was strong in May.

  Strengths

  Goldman Sachs estimates manufacturing industrial production may rise 1.2% month-on-month, supporting overall industrial production growth.

  Weaknesses

  Flat energy output and lower construction output may offset part of the manufacturing rebound.

  Comparison

  Manufacturing outperformed energy and construction-related production.

  Risks

  The order side still has volatility from large orders and defense-related orders, which could affect the sustainability of the data.

Key data

• May manufacturing orders+1.9% momAbove consensus expectation of +1.1%; prior value was -3.2%, revised from -3.8%.
• May manufacturing orders excluding large orders+1.0% momA three-month-over-three-month growth rate of +4.1% on an adjusted basis.
• May industrial turnover+1.8% momBelow preliminary estimate of +2.7%, but at the highest level since February 2024.
• Industrial turnover three-month trend+1.1% 3m3mIndicates improving sales-side trend.
• Other transport equipment orders+85.0% momIncludes aircraft and key defense categories and is an important contributor to order recovery.
• Basic metals turnover+7.1% momMade a large contribution to industrial turnover in May.
• Computers and electronics turnover+4.6% momMade a large contribution to industrial turnover in May.
• Chemicals turnover+3.6% momAt the highest level since 2022.
• Automobile manufacturing turnover+3.1% momShows solid expansion in a key automotive manufacturing sector.
• Goldman Sachs forecast for May industrial production+0.5% momStrong manufacturing growth is expected to be partly offset by flat energy output and weaker construction activity.

Impact & implications

The data is somewhat positive for Germany's short-term growth outlook, indicating manufacturing orders and sales improved versus April and euro area demand remains the leading driver. If industrial production data confirms Goldman Sachs' forecast, it would support improved second-quarter German manufacturing activity and the possibility of upward revisions to GDP tracking estimates.

Risks

• Domestic demand remains behind euro area demand and is affected by a high base at the end of 2025.
• Automotive manufacturing orders continue to decline, suggesting persistent pressure on the order side in some key sectors.
• Other transport and defense-related orders were volatile, which could amplify one-month data noise.
• Industrial turnover was below the preliminary estimate, indicating that although momentum is high, it still needs to be confirmed by subsequent industrial production data.

What to watch

• Whether subsequently released May German industrial production data reaches Goldman Sachs' expected +0.5% month-on-month.
• Upcoming updates from Goldman Sachs on euro area data and GDP tracking estimates.
• Whether the divergence between euro area, non-euro area, and domestic orders persists.
• Whether manufacturing sales diffusion remains broad-based rather than concentrated in a few sectors.
• Whether defense-related and other transport equipment orders continue to cause data volatility.