Germany: Contraction in manufacturing activity deepens in August
The S&P Global HCOB Germany Manufacturing Purchasing Managers’ Index (PMI) fell to a five-month low of 42.4 in August from 43.2 in July. As a result, the index moved further below the 50.0 no-change threshold, and signaled a faster deterioration in manufacturing-sector operating conditions compared to the previous month.
August saw the fastest decrease in new orders since November 2023: Domestically, firms noted customer hesitancy and weak demand, particularly from the construction sector, while the downturn new export orders accelerated to a nine-month high. Accordingly, manufacturers cut production volumes at the second-quickest rate in the past six months. Moreover, job shedding and the decrease in work backlogs quickened.
Regarding prices, input costs remained largely unchanged in August as firms were able to negotiate lower prices with suppliers. Moreover, factory gate charges dropped at the smallest monthly clip since February 2023. Lastly, business confidence in growth prospects for the coming year retreated to the lowest level since March, driven by declining order books and economic concerns.
Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, commented:
“The recession is still hitting the consumer goods sector, and it is also dragging down the intermediate and capital goods industries. […] With new orders declining again, and at a slightly faster pace, there’s little hope that the capital goods sector will see any expansion in the coming months.”