Manufacturing PMI picked up slightly in November, but conditions remained subdued overall.

November data indicated that a modest rebound in new order volumes, as well as further expansions of production and employment levels, supported a solid overall improvement of business conditions in the German manufacturing economy. That said, the rates of growth of output and new business were well below the averages recorded in 2006 and 2007 to-date.
The seasonally adjusted NTC/BME Purchasing Managers’ Index (PMI) – a composite index designed to provide a single-figure measure of the health of the manufacturing sector – rose from 51.7 in October, to 53.7 in November, but was still the second-lowest since December 2005. The PMI remained above the critical 50.0 value for a twenty-seventh month running in November (the longest continuous period in the series history), although the latest reading was well below the average for this period (56.4).
Output growth was again largely confined to the intermediate and investment goods producing sectors in November. Measured overall, the rate of expansion was slightly above October’s low, but still indicative of the second-weakest increase in production since September 2005.
Companies reported that growth of new work received was the principal factor underpinning the latest increase in production. Although the expansion of new business was less marked than the long-run survey average, November data was still an improvement compared to the previous month’s decline.
Growth of new export business was also subdued in November, with the latest increase the second-weakest for thirty-two months (the least marked over this period was recorded in October 2007). German manufacturers noted that slower economic growth in their export markets, as well as the strong euro, had a negative influence on the volume of new business received from abroad.
Although the rates of growth of output and overall new orders were well below those seen earlier in 2007, November data pointed to further robust employment growth in the manufacturing sector. Job creation was broad-based across the three market groups and strongest in the investment goods sector. With November data pointing to backlog accumulation, some firms attributed staff recruitment to increased production requirements.
German manufacturers indicated that price pressures intensified in November, as higher crude oil, energy and raw material costs led to a sharp and accelerated rise in average input prices. The rate of input cost inflation was the strongest for four months and well above October’s recent low. In response to further downward pressure on profit margins, companies pointed to a solid increase in factory gate prices during the latest survey period.
Meanwhile, companies continued to streamline the volumes of pre-production inventories and stocks of finished goods at their plants in November.